Boris Johnson will today reveal his long-awaited proposal for solving the social care crisis, which has been twinned with plans to bring down soaring NHS waiting lists. To fund the moves, an increase in national insurance has been proposed.
However, experts are also warning families that a hike in inheritance tax (IHT) and capital gains (CGT) could also be on the horizon as Prime Minister Boris Johnson and Chancellor Rishi Sunak hunt for ways to fund social care, the NHS and Covid bailouts. Tax charges could double in some cases and families could be forced to sell homes as a result.
As we have discussed in numerous blogs over the last year, property prices are rising at an extraordinary rate, and these rising property prices are dragging more people into the inheritance tax net. This means even more will get caught if IHT is increased.
The nil-rate threshold has been frozen at £325,000 since 2009, and that will continue until at least April 2026. HM Revenue & Customs (HMRC) pocketed a whopping £5.4 billion from IHT in the 2020 to 2021 tax year, and will be looking for ways to raise yet more revenue from this hated levy.
Personal taxes, including IHT and CGT, could be in for a massive overhaul given the amount they raise for the Treasury. Anyone who thinks a rise could affect them should start planning to reduce any potential bill now by making the most of current allowances and passing assets onto loved ones before any new reforms are introduced.
Anyone who sell assets at a profit is at risk of an CGT bill if sold at a profit, including property other than your main home, shares and other investments held outside of a Tax-Free ISA, as well as paintings, antiques and jewellery.
Currently, basic rate taxpayers pay capital gains tax at 10 percent, rising to 20 percent for higher-rate taxpayers. These rise to 10 percent and 28 percent respectively when selling an investment property or second home.
Many suspect CGT will be synchronised with income tax which would mean everyone would face at least a 100 percent increase in the rate payable. According to some expects, there are some people who may need to go as far as selling family homes to pay their IHT bills,
HMRC generated a record £9.8 billion a year from capital gains tax in the 2019/20 tax year, the latest figures available. That is up fourfold from just £2.5 billion a decade earlier.
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