Often described as Britain’s “most hated tax”, inheritance tax seems uniquely able to enrage all sorts of people. Theoretically charged at 40 per cent on the value of an individual’s estate above £325,000, it is perceived as unfair for many different reasons.
“Inheritance tax is a wholly voluntary tax,” reads the most recommended comment underneath last week’s FT article on proposed IHT reforms. “Ask any specialist tax lawyer or accountant. The UK’s annual £5bn IHT bill is only paid by the wealthier middle classes, who have less ability to avoid it through planning. Virtually none is paid by the very wealthy in the UK.” Tax laws surrounding inheritance are also extremely complicated, baffling families and executors at a time when they may be struggling with a bereavement. Meanwhile, rising property prices in many parts of the country, coupled with an IHT threshold that has been frozen for a decade, mean more people are being caught by the tax. Government receipts for 2018-19 were the highest on record. And although only 5 per cent of estates have duties to pay, 10 times as many have to complete and submit lengthy tax forms. Against this restive background, the chancellor asked the Office of Tax Simplification (OTS), an independent statutory body, to review the tax 18 months ago. Its strict remit meant it could only focus on how to simplify IHT from a “technical and administrative” perspective. It therefore did not consider policy questions, such as whether the tax should be abolished. Nevertheless, if enacted, recommendations made last week would represent a major shake-up of the way assets are passed on in the UK — rewriting rules which have not changed for at least four decades. FT Money looks at the main proposals, their implications — and what chance they have of becoming reality.
Source: Punch
