The Spring Budget introduced a new relief in inheritance tax. While fiscally very small, this new allowance for passing on land used for ‘environmental land management’ adds to a lengthy and costly set of reliefs and exemptions in the tax. There are several reforms that could be enacted that would move towards closing some of these loopholes, make the system fairer, and raise revenues that could be used to reduce the main rate of inheritance tax or fund other tax and spending priorities. Specifically, abolishing the exemption given to a certain class of shares, limiting the scope of agricultural and business reliefs, and bringing pension pots into estates could raise around £1.6 billion, £1.8 billion, and £0.4 billion, respectively, in 2029–30.
Mubin Haq, CEO of abrdn Financial Fairness Trust, said:
‘A key factor undermining support for taxes is the public perception that there are loopholes a small minority are taking advantage of. That’s the situation facing inheritance tax, with a myriad of reliefs available. Clamping down on a few of the main exemptions could increase the amount raised through inheritance tax by over one-fifth. That’s over £2 billion in additional revenue by the end of the decade, which could fund our overstretched public services.’
