It has recently been suggested in the media that Rishi Sunak is going to make cuts to or even abolish Inheritance Tax. The decision to reduce Inheritance Tax, or its complete abolishment, is a contentious issue and has been met with both support and criticism.
One of the main arguments for cutting Inheritance Tax, is its potential to stimulate economic growth. By reducing tax on inherited wealth, the Government suggests that individuals may seek to invest, spend and engage in other economically productive activities. Furthermore, this potential injection of funds into the country could lead to increased consumer spending, business investments and overall economic growth.
Such a decision by the Government is particularly significant for small businesses, often faced with challenges in navigating the intricacies of inheritance tax. The abolishment of inheritance tax may facilitate smoother transitions in family-owned enterprises, enabling them to pass on their legacy to family members without the fear of a substantial tax burden. This aligns with the Government’s broader agenda to support entrepreneurship and foster a favourable environment for business growth.
Whilst there are a number of critics who argue that cutting inheritance tax could exacerbate wealth inequality, others contend that it could lead to a fairer system. The Government has in the past suggested that such a decision to abolish tax may be seen as a measure to balance the scales, ensuring that individuals from various income brackets have more equal opportunities for wealth accumulation. Additionally, the move might encourage responsible wealth management, as families feel more secure in their financial planning, knowing that the tax burden on their children is alleviated.
Reducing or abolishing Inheritance Tax also has the potential to enhance consumer confidence, with individuals and families no longer feeling burdened by the prospect of a substantial tax bill on the passing of a loved one, many may be more willing to spend and invest, contributing to a more thriving economy.
It is clear that any decision to cut inheritance tax carries significant political weight. With the Government seeking to balance economic recovery, this move may be perceived as commitment to individual financial freedom and responsible governance. However, it also opens the door to critics regarding prioritising the interests of the wealthy over the need for tax revenue to fund essential public services and reducing wealth inequality.
Whether or not the Government makes any changes to the current inheritance tax rules, or indeed proceeds with a complete abolishment of inheritance tax is yet to be seen.
Should you wish to receive advice with reference to the current inheritance tax rules, please do not hesitate to contact us on 01279 295047 or complete our enquiry form and we will be very happy to assist you. Alternatively, please see our Inheritance Tax Calculator where you can see how the current rules may affect your personal circumstances.