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With political party conference season upon us and the Tories scrambling for ways to appeal to voters and lessen Labour’s lead in the polls, abolishing inheritance tax has again been floated as the next government giveaway.

So, how many people are paying inheritance tax and how much are they paying: will abolition allow grieving loved ones to save thousands or is this a boon to the homeowning Tory base?

Or is this just a sensible policy measure benefitting both groups, given house prices are still more expensive than they were before the pandemic and inflation stood for months in double digit territory?

With widespread dislike of inheritance tax, the incorrect belief among taxpayers that they’ll fork out because of the toll, calls for abolition and reform coming from all corners, yet only small percentages of assets being affected by the charge, Prime Minister Rishi Sunak may have landed on a policy that few would miss in its current form.

It is after all what Tories call the “most hated tax”.

While only a small percent pay inheritance tax, new data from the Institute for economic research, Fiscal Studies (IFS) says the sums could be significant to some: if all non-spousal inheritances transferred next year were equally shared between all 25 years olds, each would receive around £120,000.

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The prime minister refused to comment on inheritance tax “speculation”.

How many are paying?

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Latest available figures from the tax man, His Majesty’s Revenue and Customs (HMRC), show 27,000 estates paid inheritance tax in the year 2020 to 2021. An estate encompasses a person’s assets: their house, any jewellery or other valuables they might own. Though inheritance tax isn’t paid on pension and insurance money.

For context, more than half a million (577,160) people died in England and Wales in 2022.

Essentially, less than 4% (3.73%) of estates paid inheritance tax in the 2020 to 2021 year.

And the number of estates paying inheritance tax is up by 4,000 people since the previous tax year, 2019 to 2020, as the numbers of people who died increased during the COVID-19 pandemic.

What are they paying?

At present, inheritance tax is charged at 40% and applies to estates worth more than £325,000. There are, however, allowances that can mean its only paid on more valuable estates.

If a main residence is being passed to children or grandchildren a £175,000 allowance is added, meaning only amounts of £500,000 are subject to inheritance tax. Married couples can share that allowance, doubling it and allowing a £1m estate to be passed on to children tax free.

Sunak is said to be looking at reducing the levy in the budget in March, working towards an eventual abolition.

Official HMRC statistics show £5.76bn of inheritance tax liabilities were racked up in the 2020 to 2021 tax year. This was higher than usual – to the tune of £800m, a 16% increase – as COVID-19 caused a greater number of deaths that year.

This year more than £3bn has been generated in just four months, provisional HMRC figures showed, and June broke the monthly record.

While new highs of inheritance tax are coming in, other forms of wealth tax, like capital gains tax (CGT) – the levy on things like income from a second property or shares – are also reaching new highs, greater than inheritance tax.

CGT added £16.7bn to the public purse in the 2021 to 2022 tax year and came from 94,000 taxpayers, HMRC said.

Meanwhile the inheritance tax take from April to August this year was £3.2bn, £300m higher than in the same period a year earlier as asset values have increased and rate rises meaning more interest is charged on late payments to HMRC.

It is worth noting that tax receipts are up across the board. This is not unique to inheritance tax.

A combination of higher wages and more expensive goods (again, due to inflation) meant income tax, national insurance and capital gains tax yields were up. Overall HMRC said £19.8bn more was taken in from April to August this year than last, adding up to a total of £331.1bn.

The cost of abolition is £7bn, according to analysis from the IFS.

Who’s paying?

Notionally people passing on estates worth more than £500,000 would pay, but the figures demonstrate only a smaller number of people, in practise, do.

In theory, rich people’s estates should be inheritance taxed but there are ways around paying. People with legal or tax advisers can limit their liability.

For example, gifts of up to £3,000 in value can be given tax free. This may be possible for (and benefit) a wealthier person giving away collectors items but not a middle income earner passing on the family home.

But commentators say the exchequer could get even more from inheritance tax soon.

Research from investment service provider, Wealth Club, says the number of people paying inheritance could rise by 50% in a decade and £9bn could be yielded by 2029.

“The combination of rising house prices and inflation will push up both the number of families paying inheritance tax and the amount they pay”, said Nicholas Hyett, Investment Manager at Wealth Club.

The IFS goes one further in its new analysis and says around £15bn could be gathered from inheritance tax in a decade’s time.

Who would benefit from inheritance tax cuts?

People who may not think of themselves as wealthy, have come in scope of inheritance tax. These people could benefit as house prices have grown and the recent inflation cycle brought prices up.

Inheritance tax bands have been frozen since 2009 and they’re not due to be revised until 2028 even though most prices haven’t stayed at 2009 levels.

Those who didn’t have a spouse to share tax credits with or who do not wish to pass their estate to a child or grandchild, missing out on the exemptions in the process, are the kinds of people in line to benefit.

Research by the IFS says around half (47%) of the benefit of banning inheritance tax would go to those with estates of £2.1m or more, who represent the top 1% of estates.

That group would benefit from an average tax cut of around £1.1m, IFS figures show. The vast majority (roughly 90%) of estates not paying inheritance tax would not be directly affected by the ban.

Who would not benefit, according to the IFS, are people without assets. By the time inheritances arrive, the think tanks says, wealth inequalities are already well entrenched and hard to undo.

In other words, unless you already have rich parents, inheritance tax isn’t much good to you.

The question of whether binning this policy is designed to benefit people like Rishi Sunak, who are wealthy, depends on what the tax is replaced with, or not.

Why might it be in line for the scrap heap?

Inheritance tax is widely disliked.

Despite the data showing less than 4% of estates end up paying the levy, the public believe they’ll be affected, according to YouGov polling done for The Times.

Nearly a third (31%) of survey participants thought their assets will be valuable enough to pay inheritance tax and 15% thought they themselves would have to pay the tax on things they inherit.

Just 5% said the threshold for inheritance tax was £1m.

That’s not to mention the objections of politicians. It’s not the first time the Conservatives have tried to scrap the toll. Not three months have passed since the last time Tories flew this particular policy kite.

Labour in recent days have been staunch in their opposition to getting rid of inheritance tax but only because it is an unfunded tax cut.

Even left leaning think tank, the Resolution Foundation, and the IFS, want the tax gone.

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What’s happening with inheritance tax?

Alternatives

Both the Resolution Foundation and the IFS have ideas about what should fill its place.

For its part the Resolution Foundation proposes a lifetime allowance for everyone. Each person can inherit up to £125,000 over the course of their life and after that you should pay a tax rate of 20% on what you get for anything up to £500,000, for anything higher than half a million received after the £125,000 cut off, a tax rate of 30% should be applied.

Gifts and assets transferred between spouses should be exempt, the foundation proposes.

The financial benefits would better than inheritance tax as it currently stands, according to analysis the think tank has done: £5bn more could be collected a year, compared to the amount gathered in the 2020 to 2021 year. That would equate to tax revenues of £11bn.

Another positive, the Resolution Foundation says, is everyone has a lifetime benefit and so wealth is more likely to be spread around, among families for instance.

A further option, proposed by the Wealth Club, is to keep the tax as is but just raise the points at which you’re taxed in line with inflation.

Either way, voters are unlikely to hear an announcement on the tax future until Sunak’s Tory Party conference speech in early October or the government’s autumn statement in November.

Sources have told Sky News that, despite reports, no changes will be made this year.

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New Look owners pick bankers to fashion sale process

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New Look owners pick bankers to fashion sale process

The owners of New Look, the high street fashion retailer, have picked bankers to oversee a strategic review which is expected to see the company change hands next year.

Sky News has learnt that Rothschild has been appointed in recent days to advise New Look and its shareholders on a potential exit.

The investment bank’s appointment follows a number of unsolicited approaches for the business from unidentified suitors.

New Look, which trades from almost 340 stores and employs about 10,000 people across the UK, is the country’s second-largest womenswear retailer in the 18-to-44 year-old age group.

It has been owned by its current shareholders – Alcentra and Brait – since October 2020.

In April, Sky News reported that the investors were injecting £30m of fresh equity into the business to aid its digital transformation.

Last year, the chain reported sales of £769m, with an improvement in gross margins and a statutory loss before tax of £21.7m – down from £88m the previous year.

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Like most high street retailers, it endured a torrid Covid-19 and engaged in a formal financial restructuring through a company voluntary arrangement.

In the autumn of 2023, it completed a £100m refinancing deal with Blazehill Capital and Wells Fargo.

A spokesperson for New Look declined to comment specifically on the appointment of Rothschild, but said: “Management are focused on running the business and executing the strategy for long-term growth.

“The company is performing well, with strong momentum driven by a successful summer trading period and notable online market share gains.”

Roughly 40% of New Look’s sales are now generated through digital channels, while recent data from the market intelligence firm Kantar showed it had moved into second place in the online 18-44 category, overtaking Shein and ASOS.

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Coca-Cola brews up sale of high street coffee giant Costa

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Coca-Cola brews up sale of high street coffee giant Costa

The Coca-Cola Company is brewing up a sale of Costa, Britain’s biggest high street coffee chain, more than six years after acquiring the business in a move aimed at helping it reduce its reliance on sugary soft drinks.

Sky News can exclusively reveal that Coca-Cola is working with bankers to hold exploratory talks about a sale of Costa.

Initial talks have already been held with a small number of potential bidders, including private equity firms, City sources said on Saturday.

Lazard, the investment bank, is understood to have been engaged by Coca-Cola to review options for the business and gauge interest from prospective buyers.

Indicative offers are said to be due in the early part of the autumn, although one source cautioned that Coca-Cola could yet decide not to proceed with a sale.

Costa trades from more than 2,000 stores in the UK, and well over 3,000 globally, according to the latest available figures.

It has been reported to have a global workforce numbering 35,000, although Coca-Cola did not respond to several attempts to establish the precise number of outlets currently in operation, or its employee numbers.

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This weekend, analysts said that a sale could crystallise a multibillion pound loss on the £3.9bn sum Coca-Cola agreed to pay to buy Costa from Whitbread, the London-listed owner of the Premier Inn hotel chain, in 2018.

One suggested that Costa might now command a price tag of just £2bn in a sale process.

The disposal proceeds would, in any case, not be material to the Atlanta-based company, which had a market capitalisation at Friday’s closing share price of $304.2bn (£224.9bn).

At the time of the acquisition, Coca-Cola’s chief executive, James Quincey, said: “Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide.

“Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand.

“Costa gives us access to this market with a strong coffee platform.”

However, accounts filed at Companies House for Costa show that in 2023 – the last year for which standalone results are available – the coffee chain recorded revenues of £1.22bn.

While this represented a 9% increase on the previous year, it was below the £1.3bn recorded in 2018, the final year before Coca-Cola took control of the business.

Read more from Sky News:
TikTok puts hundreds of UK jobs at risk
Consumer confidence at highest point this year

Coca-Cola has been grappling with the weak performance of Costa for some time, with Mr Quincey saying on an earnings call last month: “We’re in the mode of reflecting on what we’ve learned, thinking about how we might want to find new avenues to grow in the coffee category while continuing to run the Costa business successfully.”

“It’s still a lot of money we put down, and we wanted that money to work as hard as possible.”

Costa’s 2022 accounts referred to the financial pressures it faced from “the economic environment and inflationary pressures”, resulting in it launching “a restructuring programme to address the scale of overheads and invest for growth”.

Filings show that despite its lacklustre performance, Costa has paid more than £250m in dividends to its owner since the acquisition.

The deal was intended to provide Coca-Cola with a global platform in a growing area of the beverages market.

Costa trades in dozens of countries, including India, Japan, Mexico and Poland, and operates a network of thousands of coffee vending machines internationally under the Costa Express brand.

The chain was founded in 1971 by Italian brothers Sergio and Bruno Costa.

It was sold to Whitbread for £19m in 1995, when it traded from fewer than 40 stores.

The business is now one of Britain’s biggest private sector employers, and has become a ubiquitous presence on high streets across the country.

Its main rivals include Starbucks, Caffe Nero and Pret a Manger – the last of which is being prepared for a stake sale and possible public market flotation.

It has also faced growing competition from more upmarket chains such as Gail’s, the bakeries group, which has also been exploring a sale.

Coca-Cola communications executives in the US and UK did not respond to a series of emails and calls from Sky News seeking comment on its plans for Costa.

A Lazard spokesperson declined to comment.

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TikTok puts hundreds of UK jobs at risk

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TikTok puts hundreds of UK jobs at risk

TikTok is putting hundreds of jobs at risk in the UK, as it turns to artificial intelligence to assess problematic content.

The video-sharing app said a global restructuring is taking place that means it is “concentrating operations in fewer locations”.

Layoffs are set to affect those working in its trust and safety departments, who focus on content moderation.

Unions have reacted angrily to the move – and claim “it will put TikTok’s millions of British users at risk”.

Figures from the tech giant, obtained by Sky News, suggest more than 85% of the videos removed for violating its community guidelines are now flagged by automated tools.

Meanwhile, it is claimed 99% of problematic content is proactively removed before being reported by users.

Executives also argue that AI systems can help reduce the amount of distressing content that moderation teams are exposed to – with the number of graphic videos viewed by staff falling 60% since this technology was implemented.

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It comes weeks after the Online Safety Act came into force, which means social networks can face huge fines if they fail to stop the spread of harmful material.

The Communication Workers Union has claimed the redundancy announcement “looks likely to be a significant reduction of the platform’s vital moderation teams”.

In a statement, it warned: “Alongside concerns ranging from workplace stress to a lack of clarity over questions such as pay scales and office attendance policy, workers have also raised concerns over the quality of AI in content moderation, believing such ‘alternatives’ to human work to be too vulnerable and ineffective to maintain TikTok user safety.”

John Chadfield, the union’s national officer for tech, said many of its members believe the AI alternatives being used are “hastily developed and immature”.

He also alleged that the layoffs come a week before staff were due to vote on union recognition.

“That TikTok management have announced these cuts just as the company’s workers are about to vote on having their union recognised stinks of union-busting and putting corporate greed over the safety of workers and the public,” he added.

Under the proposed plans, affected employees would see their roles reallocated elsewhere in Europe or handled by third-party providers, with a smaller number of trust and safety roles remaining on British soil.

The tech giant currently employs more than 2,500 people in the UK, and is due to open a new office in central London next year

A TikTok spokesperson said: “We are continuing a reorganisation that we started last year to strengthen our global operating model for Trust and Safety, which includes concentrating our operations in fewer locations globally to ensure that we maximize effectiveness and speed as we evolve this critical function for the company with the benefit of technological advancements.”

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