A cross party group of MPs, The All-Party Parliamentary Group on Inheritance and Intergenerational Fairness (APPG), has published a report recommending the government to consider radical reforms to the Inheritance Tax (IHT) regime.
The recommendations published this week include:
- A lower rate of IHT on death of 10% (20% for estates worth more than £2 million), reduced from the current rate of 40%.
- The abolition of the existing lifetime gift allowances to be replaced with an annual gifts allowance of £30,000. All lifetime gifts made in excess of this annual allowance would be taxed immediately at 10%.
- The abolition of Agricultural Property Relief and Business Relief.
- Compulsory reporting of lifetime gifts above a certain level to HM Revenue & Customs.
While a previous report by the APPG in May 2019 suggested more cautious, piecemeal reforms to try and simplify the IHT regime, this new report goes much further and calls for a complete overhaul of the current system. IHT has been described as “Britain’s most hated tax” and the proposals put forward are aimed at making the IHT regime fairer and easier to understand. The changes also aim to reduce what is seen as widespread avoidance of IHT by those wealthy enough to make substantial lifetime gifts or invest in relievable assets.
It is likely that the government will consult further before making any decision on these proposals so it is unclear which, if any, of the APPG’s recommendations may become law.
It is always important to keep estate and tax planning under review as family circumstances and tax laws change. Other than the introduction of the Residence Nil Rate Band in 2017 there have been no significant changes to the UK IHT regime for many years but pressure for at least some reform does seem to be growing.
The current IHT regime can be very favourable for farmers and business owners and those who want to pass on significant wealth to their family during their lifetime. Given the potential for changes to this favourable regime it is vital to keep up to date with developments and to take expert advice to make sure no planning opportunities are lost.
If you have any questions or would like further details in relation to this topic or if you would like to make an appointment to discuss your own circumstances, please feel free to contact us on 0300 0947777.