Reforming Inheritance Tax has been proposed for a number of years and there have been recent consultations by the Office of Tax Simplification. On 29 January the All-Party Parliamentary Group for Inheritance & Intergenerational Fairness published a reported recommending a complete overhaul of the current Inheritance Tax rules, replacing it with a different regime.
The key recommendations suggest simplifying Inheritance Tax and lowering the tax rate charged, although this would not mean less tax collected, which is currently £5.4 billion per annum.
- A flat rate of 10% charged on both lifetime and death transfers, with 20% where an estate exceeds £2 million
- The Nil Rate Band and the spouse and charity exemptions to be maintained
- Agricultural Property Relief and Business Property Relief to be abolished
- The seven-year rule for Potentially Exempt Transfers to be abolished
- A new tax-free annual gift allowance of £30,000, with amounts in excess taxed at 10%
- Review of the Capital Gains Tax uplift on death on the value of assets in the estate
- Simplification of the taxation of trusts.
Although no formal changes have been announced by the government, with Budget Day looming on 11 March and Boris Johnson and his new Cabinet wishing to make an impression, there could be changes introduced sooner than anticipated. However as these proposals are to radically reform the Inheritance Tax regime, it is more likely that a formal consultation will commence, but there may be some interim reforms seen in this Budget.
It is important to keep your estates and planning under review, as tax rules and personal circumstances change. If you would like advice on Inheritance Tax or your estates and updating your Wills, please contact the TSP Wills and Estates team on 01206 574431 or by email at firstname.lastname@example.org.