Scrapping Inheritance Tax (IHT) is back on the Cabinet table, with reports that Prime Minister Rishi Sunak is considering the move as he looks towards this year’s general election.

There are now strong suggestions that the tax is in chancellor Jeremy Hunt’s sights again, ahead of the spring Budget, which will take place on March 6.

Political pundits believe it may well be the final opportunity for the Conservative government to announce any significant tax changes before voters go to the polls.

As well as the axe falling on IHT, there is already speculation that a range of tax cuts may be pulled out of the chancellor’s red box, including cutting the basic 20 per cent rate of income tax.

There was strong speculation IHT would be axed last November as part of the chancellor’s raft of Autumn Statement pronouncements.

But that talk failed to materialise. Now, as the Tories look to put a clear divide between themselves and Labour on tax matters, it appears this may be the year IHT is disposed of.

IHT is owed on the part of someone’s estate above the tax-free threshold of £325,000, which can rise to £500,000 if a home is given to a child or grandchild.

The current rate is 40 per cent. Scrapping the tax would cost the Treasury around £8bn a year.

According to reports, IHT accounts for less than one per cent of total HMRC tax receipts. However, the sums gained by the Treasury have risen substantially each year since the pandemic, with the annual sum rising by 38 per cent since Covid struck.

In 2019/2020, before the pandemic, IHT receipts totalled £5.1bn, marking a -4.4 per cent fall on the previous year. Last year, the £7.1bn collected marked a huge 17 per cent year-on-year increase.

The IHT nil-rate band, which is the maximum amount a person can inherit before paying the tax, has been stuck at the £325,000 figure since 2009 – despite rising house prices. The tax’s gifting allowance of £3,000 a year has also remained unchanged since 1981.

Alongside claims of possible tax cuts, the housing secretary Michael Gove told The Times newspaper that help for first-time property buyers would “definitely” form part of the Conservatives’ pre-election appeal to voters.

There are reports that could include resurrecting a form of the ‘Help to Buy’ scheme,’ which ended last year.

Meanwhile, there are ways in which the existing IHT regime can currently benefit your own estate planning and ensure a fairer distribution of your assets through your family.

As with most tax issues the key here is to start your planning early and to get a good handle on your estate. Having a clear strategy is also important.

The £3,000 a year annual gift allowance is good place to start. So is reviewing your will and making sure your assets will be dispersed the way you wish.

Whatever happens to IHT in the future the question you should be asking now is: “Is my estate planning up to date?”

• To discuss any issues around IHT or other tax issues please contact me on 01772 430000

The raft of 110 announcements made by Jeremy Hunt in his Autumn Statement included some welcome good news for small businesses and the self-employed.

Small business owners and those that work for themselves have felt the pressure of the cost-of-living, high inflation and the continuing impact of the pandemic over the past year.

So the measures to reduce their tax burden will be widely welcomed, not least the changes to National Insurance (NI), including abolishing class 2 payments.

Mr Hunt said the announced tax cuts for the self-employed would be worth £350 per year. Abolishing class 2 NI will save them £192 annually.

Nearly two million self-employed people will benefit and on top of that the chancellor also delivered a reduction in class 4 NI that they pay.

Taken together, those measures will save self-employed workers £350 a year from April next year.

Mr Hunt also announced that he was cutting the main rate for employee NI from 12 per cent to 10 per cent from January.

The chancellor said 27 million people would benefit from that move and the reduction will be worth £450 a year or someone on an average salary.

The cash benefit for the self-employed is not large but every little helps. Whether the general reduction in national insurance will encourage more spending to stimulate growth remains to be seen.

An extension of the 75 per business rates discount for hospitality, retail and leisure for another year will also help businesses that really are under pressure.

Business rate relief was also extended with a freeze on the small business multiplier for another year.

Moves to help end the scourge of late payment are also positive though more action is needed. The £50m of extra investment in apprenticeships in engineering and other key sectors is also welcome, if it delivers results.

Economic growth was at the heart of the chancellor’s statement. Whether he has done enough to make any real difference remains to be seen.

And there are concerns about the impact of the increase in the National Living Wage, which will rise by almost 10 per cent next year, from £10.42 to £11.44 an hour – benefiting at least 1.7m workers.

Business groups and analysts have warned it could spark future rises in inflation and fears that some employers will struggle to pay the new rate, putting jobs at risk.

Measures to boost investment in “strategic manufacturing” were included in the statement. Mr Hunt committed £4.5bn to manufacturing up to 2030, with £975m for aerospace and £960m for the green sector.

He told the Commons: “Taken together across our fastest-growing innovation sectors, this support for manufacturing alone will attract an estimated £2bn of additional investment a year over the next decade.”

Mr Hunt also announced a widely anticipated decision to make permanent “full expensing” for businesses.

That measure means that for every £1 that a business invests in IT, machinery and equipment, it can claim back 25p in corporation tax.

He declared the move as “the largest business tax cut in modern British history” and it will be of benefit to larger companies.

The chancellor also committed to reforming the planning system to allow for faster planning applications when it comes to major business projects.

Mr Hunt will also consult on giving pension savers a “legal right to require a new employer to pay pension contributions into their existing pension”.

In response, shadow chancellor Rachel Reeves said that under the Conservatives growth had “hit a dead end” and the economy would be £40bn smaller by 2027 than it had claimed in March.

• You can find in-depth analysis of the Autumn Statement on our website www.wnj.co.uk

A large increase in the amount of R&D tax relief claimed by UK businesses in the financial year 2021 to 2022 was driven by small firms, according to the latest figures.

They show a total of £7.6bn was claimed – an 11 per cent rise on the previous 12 months.

The figures also show the total number of R&D tax credit claims for the tax year 2021 to 2022 was 90,315, up five per cent on the previous year.

The information and communication, manufacturing, and professional, scientific and technical sectors continued to have the greatest volume of claims, making up 62 per cent of the total.

However, despite the rise in figures there are concerns that government changes that came into effect in April this year may have a negative impact on the scheme

Martin McTague, national chair of the Federation of Small Businesses (FSB), said: “The figures show a huge increase in SME expenditure on R&D was driven by the R&D Tax Credit Scheme, prior to cuts made by the government that came into effect in April this year.

“The figures align with our latest research on innovation, with 46 per cent of small firms telling us that extra tax relief would encourage them to innovate.

“Our own research also shows 64 per cent of small firms which applied for R&D tax relief in the last three years have improved cashflow for their business, while over a half increased their investment in R&D.

“Two-fifths have used the tax credits to increase their investment in future projects, and more than a third of recipients say it has led them to undertaking projects that would not have happened otherwise.

“Government cuts to R&D tax relief, even for R&D intensive firms, are self-defeating, especially when countries such as France and the US are going in the opposite direction.

“There has yet to be an official assessment on the impact of R&D tax credits cuts on small firms. The government should monitor this space and publicly publish a review of the impact on the levels of R&D conducted.”

He added: “We’re concerned about HMRC’s recent clampdown on R&D tax relief recipients. Its heavy-handed approach has taken a toll on start-ups and small business owners, who have to spend hours or even days to dig up evidence for claims dated back not only months but also years.

“Clamping down on genuine abuses of the system is one thing, but HMRC causing needless stress and anxiety for firms who have claimed in good faith often on the advice of expert intermediaries is another.

“We urge HMRC to review its compliance activities and, while ensuring that it accepts genuine cases for relief, it should not be heavy-handed, aggressive or inconsistent.”

The FSB is also calling on the government to consider merging the two R&D tax relief schemes currently in operation, with a higher rate of tax relief given to smaller firms if that was to happen.

• To discuss if R&D tax credits could help your business and advice on how to apply please contact me on 01772 430000

The government has announced what it describes as tougher measures to tackle the issue of late payments to small businesses.

It says measures, which will be included in a soon to be published ‘Prompt Payment and Cash Flow Review’ will improve enable more small firms to get paid on time.

The measures have been broadly welcomed although there have been calls for the chancellor to do more to address the issue in his autumn statement later this month.

The chartered accountants body ICAEW has also revealed late payments are adding to finance woes, with cheque payments “becoming a thing again”.

New research has shown the scale of the problem. A report at the end of October revealed late payments to small businesses have hit a three-year high.

Late payment of invoices and long payment terms are key issues that businesses, especially SMEs, highlight as a barrier to their growth.

Owners and managers are forced to spend disproportionate time chasing payments; resulting cash flow problems cause even good, viable firms to struggle.

In 2022, SMES were owed on average an estimated £22,000 in late payments.

The government says that improving payment culture in the UK could boost the economy by £2.5billion annually.

Following consultation, it says it will take forward legislation to extend payment performance reporting obligations.

That will include new metrics for reporting, including a value metric, so businesses and commentators can see the value of invoices, including invoices paid late, and a disputed invoices metric.

In a statement the Department for Business and Trade said: “We will also introduce reporting on retention payments for businesses in the construction sector.”

Other measures include providing greater advice to small businesses on negotiating payment terms that better suit them, and on how going digital can help them get paid quicker and manage their cash flow.

There is also a commitment to broadening the powers of the Small Business Commissioner:

These include enabling the commissioner to undertake investigations and publish reports where necessary on the basis of anonymous information and intelligence. This measure will require primary legislation.

The statement added: “The stronger measures will benefit UK businesses by fostering a stronger payment culture and providing businesses with more predictable and reliable cash flow, allowing businesses to spend and invest with greater certainty.

“It will reduce the time spent by businesses chasing payments, freeing up more time for other activities that will help them to grow. Tackling late and long payments provides an opportunity to increase investment and productivity across the economy.

“This will improve payment culture in the UK to support smaller businesses, many of whom do not have the resources to accommodate long or late payments from their business customers.”

• To discuss any issues raised by this report please contact me on 01772 430000