With the increase in public debt to over 100% of the country’s national income and the economy having contracted by 20% in April this year, both due to covid-19, the Chancellor’s thoughts are turning to how to stimulate the economy yet pay for the debt level. As noted in a recent Financial Times article, a cut in the rate of VAT appears likely to be one possible option for stimulating the economy, but spending cuts and tax rises elsewhere may be on the cards.
With this and the recent reports on Inheritance Tax (IHT) by the Office of Tax Simplification and the All Party Parliamentary Group for Inheritance and Intergenerational Fairness in mind, now might be the time for families to consider accelerating their inter-generational tax planning. Those worried that the mood-music is towards reform of IHT, in particular in relation to the currently generous Agricultural and Business Property reliefs, should consider passing such assets down a generation under the current rules rather than, as is often recommended, waiting until death, especially given the talked about possible scrapping of the Capital Gains Tax (CGT) rebasing on death for such IHT relieved assets. Even where no such IHT relief applies, the current rate of CGT on non-residential real estate and other assets is historically low, so, while nobody likes paying taxes and the tax tail should never wag the dog, it might be best to think about taking the plunge sooner rather than later?
The public aren't going to like it but it feels like either spending cuts or tax rises are going to be necessary soon (former Tory minister)