21/11/22

UK: Wealth taxes on middle class to rake in £130bn in the coming years as squeeze intensifies.

As published on thisismoney.co.uk, Sunday 20 November, 2022.

Hated wealth taxes will cost British families more than £130billion in the coming years as the squeeze on the middle classes intensifies.

In a major Treasury windfall, Budget documents show the amount households will pay in inheritance tax and capital gains tax (CGT) will soar.

That spells misery for prudent families and entrepreneurs who have invested their savings. John O'Connell, chief executive of the Taxpayers' Alliance, said: 'The Chancellor should balance the books by getting a grip on the cost of government crisis, not by going after the family silver.'

Figures from the Office for Budget Responsibility show the Treasury will rake in £42.1billion of inheritance tax over six years. The haul will rise from £6.7billion this year to a record £7.8billion in 2027-28.

The OBR has also pencilled in £91.6billion of CGT over six years with the annual take rising to £17.9billion in 2027-28.

In total, the taxman will collect £133.7billion from the two taxes over the six-year period.

O'Connell said: 'Saving for a rainy day, building a nest egg and passing assets on to children are all targets.'

Critics have claimed inheritance tax is a levy on the middle classes as house prices soar. Currently, estates worth up to £325,000 can be passed on without inheritance tax, with a levy of 40 per cent payable above that. For married couples the threshold is £650,000.

A family home allowance sees the threshold rise to £500,000 for singletons and £1m for married couples. It means couples can pass on homes worth up to £1m tax free.

More legacies are being dragged into the tax because those thresholds have not increased with inflation, with Jeremy Hunt extending the freeze to 2028.

Julia Rosenbloom, at wealth management firm Evelyn Partners, said this 'will entrench nearly 20 years of stealth tax increases on the transfer of wealth.' CGT is the levy paid on profits made when an asset is sold although it does not apply to a family's main home.

Higher rate taxpayers pay 28 per cent on gains made on residential property and 20 per cent on other assets. Basic rate taxpayers pay 18 per cent and 10 per cent.

Hunt cut the threshold above which the tax is paid to £6,000 in April and £3,000 in 2024.

Praveen Gupta, at accountancy firm Azets, said that might mean a 'bargain hunt Britain' as business owners seek to bring forward sales.