All eyes will be on new Chancellor, Rishi Sunak when he reveals the contents of his first Budget on 11 March.
One of the announcements many are hoping for is a new approach to Inheritance Tax – and if a cross party group of MPs have their way, there is a possibility that Inheritance Tax could even be scrapped altogether.
The All Party Parliamentary Group of MPs, (APPG) have proposed that the current 40 per cent Inheritance Tax regime should be scrapped and replaced with a 10 per cent tax on annual gifts of £30,000 or more, along with a new ‘death allowance’.
Their report, if adopted by the Chancellor, would see the current rules abandoned – including the seven-year survival clause for large gift.
The plan to simplify the much vilified ‘death tax’ follows calls by the Government’s own tax advisors to revamp and simplify IHT and replace it with a single ‘personal gift allowance’.
In the 2018/19 tax year, the Treasury received £5.4billion from IHT, up 3 per cent on the previous year, due mainly to the rise in property prices, meaning more estates are becoming liable for a tax which was originally intended to be paid by the super-rich.
According to the leader of the APPG, John Stevenson, the MPs’ proposals would “increase fairness, cut complexity and reduce avoidance”.
In its report, the APPG criticises the current Inheritance Tax system as being “complex, ineffective, riddled with anomalies, distortionary and unfair”.
Amongst its recommendations, the APG is calling for:
- Gift tax to be set at 10 per cent on annual gifts of £30,000 or more, rising to a maximum of 20 per cent on estates at death of over £2million
- Scrapping the seven year rule – meaning larger estates would not be able to avoid tax on gifts
- Death allowance – to be set at a similar level to the current nil rate band of £325,000, available on the estate at death.
- Spouse exemption – spouses would continue to inherit tax free.
- Capital Gains Tax uplift – to be removed
Whether the APPG’s recommendations will have any bearing on the new Chancellor’s Budget plans, remains to be seen.
In the meantime, it is highly advisable to seek advice on estate planning to ensure your tax burden is minimised.
Speak to our tax experts and we will advise how IHT issues might impact on your estate and help you sort out your tax affairs so that more of your hard-earned money stays with you, your business and, eventually, your loved ones. To find out more, please contact us.