Critics have long argued that IHT is an optional tax and can easily be avoided by someone if they plan to give away or spend their wealth before their death.
Previous chancellors have tinkered with IHT rules to close certain planning opportunities, but revenue from IHT remains broadly flat.
Reform of IHT is long overdue and it requires careful consultation, alongside reviewing capital taxes more generally. It is unlikely dramatic reform will be announced in the Autumn Budget, but changes could happen in the future.
Like CGT, IHT raises very little in tax take for the Treasury, so it is questionable as to how much impact any changes would have on revenue generation.
One of the key areas of the present IHT system under risk is the ‘seven-year rule’ for gifts — known as the potentially exempt transfer rule for gifts — and this could be abolished and replaced with a lifetime gift allowance.
It is unlikely that the 40 per cent rate of IHT would be increased, as this is one of the highest rates in the developed world, but it could be feasibly reduced to 20 per cent if a lifetime gift allowance is introduced.
Income tax
If the government could do anything at the Autumn Budget, a universal increase to income tax would be at the top of the list. An increase in the basic rate of income tax to 21 per cent would raise £4.7bn.
The government would probably want to pursue the reintroduction of the 50 per cent income tax rate for those earning more than £150,000; however, the historic evidence suggests that the 50 per cent income tax rate — which applied from 2010–13 — did not actually lead to an increase in tax revenue.
Any income tax increase could be made temporary, with the additional revenue being directed to the NHS.
It is very easy for the government to increase income tax and is likely to be accepted by most, mainly on the grounds of sentiment given the widespread impact of the pandemic.
An increase to income tax would go against the government’s ‘triple-lock’ and could therefore be met with strong political criticism.
As the government keeps reminding everyone, these are unprecedented times and the rule book could be cast aside.
National insurance
When Mr Sunak announced the Self-Employment Income Support Scheme in April, it came with a warning that the self-employed would need to pay for the bailout through future tax rises.
Over the past five years, there have been more signals that the tax regime for the self-employed worker should be put on an identical footing to the employed worker.
This could mean that Class 4 NIC would be increased from 9 per cent to 12 per cent — on profits up to £50,000 — and the small tax benefit of being self-employed would be completely removed.
