Inheritance tax receipts hit £1.5 billion in the first two months of the current tax year, according to data released by HM Revenue and Customs (HMRC) this morning.
This is £98 million higher than the previous tax year, and continues an upward trend over the last two decades.
Nicholas Hyett, Investment Manager at Wealth Club said, “If recent rumours are to be believed, the Chancellor is considering a U-turn on the decision to subject non-doms’ global assets to inheritance tax. This was a decision that was originally expected to earn HMRC an additional £430 million a year.
However, the potential U-turn is no doubt down to the exodus of wealthy non-doms over the last six months or so. Not only does that mean the tax will raise less than hoped, but the UK also loses all the other benefits these wealthy residents bring – including spending, investment and philanthropy.
It shouldn’t come as a surprise to the government. Changes to inheritance tax was always going to be the bit that was both least popular and most easy to escape. City high earners need to be in the UK for their salaries, the mega-wealthy can be in anywhere in the world. The UK has a lot of appeal – but not enough to give up 40% of your families wealth. It’s a shame the government will only listen once the numbers start to do the talking.
Comments from non-dom advisers suggest 30% or more of their clients are considering ditching the UK for somewhere with a more favourable tax regime, and many have already done so already. The problem with the planned U-turn is that the horse has already bolted – plans are made and the risk of future changes from a government which appears be hostile to the global wealthy is too high.
If the government wants to change that perception it needs to work stop scoring own goals and look reliable. Most recently it has emerged that the Deputy Prime Minister has been pushing for IHT relief on AIM to be abolished altogether – just months after the change to 50% relief was announced. This is terrible news for AIM. The new 50% IHT relief is back in question, investments will dry up as a result and it will be even harder for small UK companies to raise money.
The government’s raids on historically IHT free investments and assets – like pensions, private company shares and AIM shares – create exactly the kind of uncertainty that puts people off making investments.”
