Inheritance tax (IHT) has once again been voted the most hated type of tax in the UK.
A survey conducted in September found that 24% of participants believed that it was the worst tax in the UK.
The respondents felt more ‘irritated’ by the fact that their loved ones lost out on benefits from their legacies above paying the tax.
Tax on income, which includes income tax and national insurance, took second place with 17% believing that it was the worst. And tax placed on spending and investment took joint third place with 15%.
Only one in 10 said that the most hated tax was the so-called sin taxes, which includes taxes on things such as alcohol, tobacco, fuel, and sugar.
In many cases, it’s more of an ideological resentment. Nobody actively enjoys paying taxes. However, while we’re prepared to accept some as a fact of life, others inspire deep and abiding hatred among millions of us.
As the chancellor weighs up potential tax changes in the Budget, details of the UK’s most hated taxes show just how unpopular a rise would be to many of them.
Inheritance tax has been placed in the top three most hated taxes in the UK over the last decade. A survey conducted as far back as 2009 placed it as second in its top three. Stamp duty land tax took third place and first was awarded to council tax.
Paid by just 4% of people in the UK, inheritance tax accounted for £3.1bn of the £334.3bn taken in tax between April and September this year. Inheritance tax collected by HRMC has risen £700m over the same period last year. HMRC states that the rise is due to a rise in wealth transfers due to the Covid-19 pandemic. The annual tax taken from inheritance tax topped £6bn last year.
The two other suggestions as to why the tax has risen so dramatically over the last two years are that the majority of wealth in the UK is owned by those over 60. This is the age bracket where Covid-19 has resulted in more deaths.
It is also due to the freeze of the nil rate band as £325,000. Which has meant that the asset amount an individual has is free before they are charged the tax at 40%. This has not risen since 2009.
Some people have advised that to reduce their tax bill, people can gift their families during their life instead of leaving it all in their will.
The firm also states that people in the UK get a gift allowance of £3,000 each year. That falls out of their estate immediately for inheritance tax purposes. People can also give small gifts of up to £250, specific gifts for family weddings, and unlimited regular gifts from income.
Outside the gifting allowances, you can also make gifts of any size, known as potentially exempt transfers. As long as you live for at least seven years after handing it over, it falls outside of your estate for inheritance tax purposes.