The UK government, under Rachel Reeves, has reached a historic high in inheritance tax collection, amounting to £2.2 billion, as it approaches the Autumn Budget. The assessment of potential reforms to the so-called ‘death tax’ is ongoing, with considerations for significant alterations. Rising asset values contribute to increased tax receipts, pushing more estates into the taxable bracket. Additional asset-based taxes show similar upward trends, indicating broader fiscal challenges.
Rachel Reeves, a prominent figure in the UK government, has amassed a remarkable £2.2 billion in inheritance tax, setting a new record as the nation moves towards the Autumn Budget. This financial milestone is largely attributed to the escalating value of assets, such as equities and real estate, which have experienced significant appreciation over the past year.
The inheritance tax, colloquially referred to as the ‘death tax’, is levied at a rate of 40% on estates exceeding the threshold of £325,000. Recent data from the Office for National Statistics (ONS) reveals that inheritance tax receipts last month amounted to £736 million, culminating in an aggregate of approximately £4.3 billion for this financial year, marking a 10% increase compared to the previous year.
Amid these developments, Reeves is reportedly evaluating various amendments to the inheritance tax framework. Considerations include extending the ‘seven-year rule’ to ten years, thereby delaying the tax-free status of gifts, and potentially abolishing reliefs associated with Alternative Investment Market (AIM) shares and exemptions allocated for businesses and agricultural land.
Agricultural land exemptions, initially designed to facilitate generational transfer among farmers, are under scrutiny for possible exploitation by affluent individuals to mitigate estate tax liabilities. This scrutiny is part of a broader strategy to reform inheritance tax and enhance revenue streams for the Treasury, which confronts mounting pressure to address fiscal deficits.
In addition to inheritance tax, other asset-based levies such as stamp duty on property transactions and shares have also posted increased revenues. Stamp duty land tax generated £1.2 billion in September alone, a rise from the previous year’s figures. Similarly, capital gains tax has shown a year-on-year increase of 16%, amassing £192 million from profits on investment disposals.
As the UK government navigates a complex fiscal environment, the impending Budget is anticipated to introduce a series of tax reforms under Reeves’ guidance. These prospective changes aim to bolster public finances but could potentially face opposition from those affected, particularly if they result in an increased tax burden on families and enterprises.
Rachel Reeves’ strategies in managing inheritance tax are pivotal as the UK braces for potential fiscal reforms in the forthcoming Budget.
