Article by Phil
Watch out more tax rises could be on the horizon, according to financial experts.
The ever popular Institute for Fiscal Studies (IFS) has come up with new proposals for the Government to raise up to an extra £2 billion in Inheritance Tax (IHT).
As if the bill wasn’t high enough already. The proposal being put forward would be to scrap the IHT relief for Defined Contribution pension pots passing to dependents tax free. These are the pensions built up by workers in the private sector paying into their pensions over a lifetime. Currently, pensions can be passe to nominated beneficiaries on death, so that the pension pot doesn’t die with the individual like it used to do. This has become a real benefit to families When their parents have passed away. But it now has a tax target on its back.
Levels of IHT have already reached new highs. Between March 23 and April 24 over £7.5 billion in IHT was collected. They say that only a small percentage of estates actually fall into the IHT threshold but £7.5 billion is still a lot for a small number of people to pay. Tax liabilities are also increasing because of delays in processing probate. Quilter have found out from the Ministry of Justice that the number of probate cases taking over a year to settle has risen by over 60% in the last 12 months. The average processing time is now 24 weeks. That’s nearly six months. Seems a bit unfair to pay extra tax because of processing delays.
But paying extra tax because of delays and inefficiencies at HMRC seems par for the course. Take overcharged tax on pension withdrawals for example. HMRC currently process over 50,000 tax rebate claims from people drawing their pensions for the first time. That’s because when people access their tax-free cash for the first time HMRC usually applies an emergency tax code and takes too much cash. In the last three months they’ve paid back £42 million in overpaid taxes. You can avoid this by speaking to a financial expert.
Other IFS targets include the tax relief for investing in the Alternative Investment Market (AIM), so the investment into growing companies. Plus, reliefs for agricultural business, as if farmers were making too much money!
The UK tax regime really is becoming a disincentive for investment and savings. These taxes on savings simply encourage people to spend what they’ve got and/or ask financial experts to look at Inheritance Tax Planning solutions to legitimately try to avoid tax.
Add this to the ever-increasing burden of fiscal drag on personal taxes and you can see why the UK currently has its highest tax burden in history, along with the highest levels of Government spending.
A Handelsbanken Wealth and Asset Management survey found that increasing number of people are worried about their finances:
- Overall, 46% of people think that their standard of living will fall over the coming year. That’s nearly half.
- The over 50’s are the most optimistic with only a third think things will get worse!
- 83% are concerned that a recession is on the horizon.
- With inflation being the biggest concern.
- Almost 30% of people said that they didn’t look at their finances because it worried them too much.
No wonder so many people have stress or want to move abroad!
But have you checked whether you have any “lost” money in dormant accounts? Those could be bank and building society accounts, investment accounts, pensions, child trust funds or even insurance policies. According to the latest figures there are 28 million dormant accounts in the UK holding an incredible £89 billion in unclaimed funds. So, it’s worthwhile checking all your old paperwork to see if there are any accounts you may have forgotten about.
Or you could try using a website like Gretel who may be able to help you track down your lost accounts.
