There has been talk of an overhaul to the inheritance tax system for years, and the volume of this chatter has risen again in recent months, particularly in the run up to the recent election (even though you probably couldn’t hear much of it above the Brexit din).
And last week, the All-Party Parliamentary Group for Inheritance & Intergenerational Fairness published a report.
The report goes so far as to recommend a complete change to the current regime, which would see the abolition of the 40% rate of inheritance tax along with many of the existing reliefs and exemptions, and the introduction of an entirely new system.
Recommendations from many expert organisations were considered in the publication of the report. The Society of Trust and Estate Practitioners (of which our own Gabrielle Dell is a member) is “strongly supportive” of the proposals which seek vastly to simplify the system. It will be interesting to see what progress these potential reforms make, and we will be sure to keep you up-to-date.
What changes does the report recommend?
|– Tax exemption for all lifetime gifts up to £3,000||– Tax exemption for all lifetime gifts up to £30,000|
|– The nil rate band||– A “death allowance” set at a similar level to the nil rate band (currently £325,000) but available in full on death no matter how much has been given away during lifetime|
|– Seven year rule for “potentially exempt transfers” (which allows the nil rate band (currently £325,000) to be given tax-free every seven years but will be subject to inheritance tax if the donor does not survive for seven years after the gift is made)||– Immediate flat rate of 10% on lifetime transfers over £30,000|
|– 40% inheritance tax on taxable estate||– Low rate of 10% on estates up to £2,000,000 and higher rate of 20% on estates over £2,000,000 (over and above the “death allowance”)|
|– Agricultural property relief|
|– Business property relief|
|– Capital gains uplift on death (whereby a beneficiary can sell property without incurring capital gains tax as the capital gains clock effectively resets as at the date of death)|