Our Inheritance Tax (IHT) regime may have its roots in the late seventeenth century, but even now commentators maintain that the laws surrounding IHT are extremely complicated, baffling families and executors at a time when they may be struggling with a bereavement.
The powers that be may, however, be set to take note, with talk of a complete overhaul of IHT on the horizon.
The All Party Parliamentary Group for Inheritance and Intergenerational Fairness (APPG) was established last year “to promote understanding of the issues generated by inheritance and intergenerational fairness and to facilitate discussion on methods of reform”.
The APPG published a report in January 2020 recommending a complete overhaul of the IHT regime that would make it simpler and fairer.
The proposed reforms for discussion include:
- IHT, currently charged at 40% on estates worth more than £325,000 (£650,000 for married couples), to be replaced by a tax of 10%, unless the estate is valued at more than £2m, in which case the tax would rise to 20%
- The majority of exemptions, such as Business Property Relief (BPR) and Agricultural Property Relief (APR) would be scrapped, although the spousal and charity exemptions would remain
- The uplift for Capital Gains Tax (CGT), whereby assets are rebased on death, would also be abolished
- A gift tax would be brought in with a 10% tax charge on gifts over £30,000
The APPG’s report is essentially a discussion document, and whether any of the proposals – many considered quite radical – make it to the forthcoming Budget remains to be seen. The one thing that we can be sure of is that with IHT forecast to raise £5.3 billion in 2019-20, it’s here to stay; looking to the future, it’s to be hoped that the system is set to become easier to understand and administer.
Our experienced Private Client team have an in depth understanding of bth simple and complex IHT issues; if you would like to discuss IHT and estate planning or any other matters, please do call.