OBR forecasts IHT and CGT receipts to rise as UK population ages
Utmost said the OBR’s latest Fiscal Risks and Sustainability Report showed demographic change and wealth transfer are likely to drive higher Inheritance Tax and Capital Gains Tax receipts over the coming decades.
The Office for Budget Responsibility has forecast that Inheritance Tax and Capital Gains Tax receipts will rise over the coming decades as the UK population ages.
Its latest Fiscal Risks and Sustainability Report said the proportion of the population aged over 80 is expected to rise from 5% in 2025 to 12% in 2075.
On that basis, IHT and CGT receipts are projected to increase from 1.4% of GDP in 2030-31 to 2.2% of GDP by 2075-76 in the OBR’s baseline scenario.
The baseline scenario also includes an assumption that large historical wealth gains among those currently of retirement age will drive a cohort effect in IHT receipts, rising to around 0.2% of GDP by the 2040s.
The OBR also presented an alternative scenario in which wealth growth outpaces GDP growth across the projection period. Under that scenario, receipts from IHT and CGT would rise to 2.7% of GDP by 2075-76.
Simon Martin, head of UK technical services at Utmost, said: “The OBR’s latest report demonstrates how demographic changes in the UK are likely to accelerate wealth transfer over the coming years and drive increases in Inheritance Tax and Capital Gains Tax.
“Treasury receipts from these taxes have already increased significantly of late driven by recent reforms alongside the ongoing freeze to thresholds and rising property values.
“The OBR notes the specific fiscal impact also arising from wealthier cohorts – particularly the ‘baby boomer’ generation – beginning to reach the end of their lives. With significant value tied up in property, which has seen strong growth over recent decades, this transfer of wealth is likely to trigger a growing proportion of tax liabilities.
“The projections underline the immense value of financial advice and the growing role that the industry is likely to play in supporting legacy planning over the coming decades.”
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