Inheritance tax is the most hated levy of all, according to exclusive new research for the Daily Express, and millions would be delighted to see it axed. IHT is even more unpopular than income tax, National Insurance and VAT. Yet it brings in relatively small amounts of money, which means Sunak could afford to scrap it altogether when he unleashes his Autumn budget on 27 October.
One in four Britons say IHT is the tax they despise above all others, according to a survey of of 2,000 people carried out by Opinium for Hargreaves Lansdown.
Inheritance tax has been the most hated levy for years, and even last month’s announcement of a 1.25 per cent National Insurance levy to fund health and social care failed to change that.
Hargreaves Lansdown personal finance analyst Sarah Coles said it doesn’t matter that only four percent of us currently pay it. “Our loathing runs far deeper than that.”
She said people hate it on principle. “Some get upset at the idea of paying taxing on money that has already been taxed as income. Others hate the idea of the taxman picking their children’s pockets.”
The £325,000 IHT nil-rate threshold has not increased since 2009, dragging more ordinary families into the net as house prices and stock markets rise.
In his March Budget, Rishi Sunak froze it at that level until at least 2026.
Launching yet another IHT grab next Wednesday would destory the Chancellor’s popular ratings. Sunak might therefore be tempted to do something really radical – and axe IHT altogether.
Inheritance tax makes up less than 1 percent of HM Revenue & Customs overall tax take.
Between April and August this year, HMRC took £280.4 billion in total taxes. Of this, IHT made up just £2.7billion.
Coles said: “Sunak could replace it with something that rises with either the size of the inheritance or the distance of the relative, or both.”
Another option is to introduce specific gift allowances to enable children to buy a house or study, as the Netherlands does.
“In the US, families can leave more than $11million (£8million) to children free of tax,” she said.
Separate research from Interactive Investor suggest people’s biggest tax fear is that the Chancellor will charge IHT on pension wealth, which it currently escapes.
Head of pensions and savings Becky O’Connor said the freedom to pass on what’s left in a defined contribution pot free of IHT is a key benefit. “Sunak would meddle at his peril.”