Published report recommends Inheritance Tax overhaul

The All-Party Parliamentary Group for Inheritance & Intergenerational Fairness (APPG) has published a report recommending the abolition of Inheritance Tax (IHT) and replacing it with an entirely different less complex and fairer regime. Expectations were that the report would suggest changes to simplify IHT, not a complete overhaul.

The APPG proposals are to introduce a tax on lifetime and death transfers of wealth, at a lower flat rate of 10%, compared with the 40% levied at present on estates valued above the Nil-Rate band.

The APPG’s report also recommends abolishing most of the reliefs, including Agricultural and Business Property relief, the 7-year gift rule, and capital gains uplifts on death.

The current annual gift allowance of £3,000 would also be replaced with one annual tax-free personal gift allowance of £30,000 which would be taxed at 10% immediately if exceeded. Larger estates above £2 million, would see this rate rise to up to 20%.

The current Nil-Rate band would be replaced by a death allowance, likely to be £325,000, available only on death, irrespective of previous lifetime giving.

The taxation of trusts would therefore also be simplified under the proposals.

Commenting on the report Neil Raiseborough, Solicitor, Head of Private Client at Alsters Kelley solicitors said, “No sudden changes are expected. The Main Residence Allowance is due to increase in April to £175,000, giving married couples up to £1m in Nil-Rate allowances. The Budget in March may hint at a consultation process to start the debate, but the Government will no doubt still have plenty to occupy itself with the Brexit transition period.”

Proper Inheritance Tax planning remains essential so if you would like any help or advice then please contact Neil Raiseborough on 01926 356044 or email: neil.raiseborough@alsterskelley.com