Inheritance Tax requires a radical shake-up, according to MPs

A group of MPs have called on the Government to amend the current rules surrounding inheritance tax, including suggestions that the current 40 per cent rate of tax should be cut to just 10 per cent.

The All-Party Parliamentary Group on Inheritance Tax and Intergenerational Fairness (APPG) has said that the current system was “complex, ineffective, riddled with anomalies, distortionary and unfair” and call on the Chancellor to take radical steps to reform it.

A report from the group suggests that most reliefs, including the residence nil-rate allowance on homes, should be scrapped and instead a flat rate of inheritance tax set at 10 per cent charged on all estates, which would rise to a maximum of 20 per cent on death estates of more than £2 million.

The cross-party group included evidence within their report that indicates that any rates above 20 per cent encouraged people to plan their affairs to mitigate tax and so the new system would lead to less tax avoidance.

John Stevenson MP, chairman of the APPG, said there were “strong opinions across the political spectrum” on Inheritance Tax and that evidence suggested that “…the rich get away with not paying and IHT is perceived as an unfair penalty on hard-working savers.”

“Our bold proposals for reform seek to address this unfairness by simplifying the system and ensuring that the higher value estates that currently take advantage of so many reliefs and exemptions actually pay some IHT.”

Other recommendations within the report included an end to large lifetime gifts and instead suggest the creation of an annual tax-free allowance of £30,000 per year per person for gifts, with amounts over this to be taxed instantly at 10 per cent.

A Treasury spokesperson said: “Inheritance Tax makes an important contribution to the public finances. We keep the tax system under constant review and will consider the APPG’s findings.”

With a Budget due on 11th March 2020 people will be carefully monitoring the Government’s approach to personal taxation. It is important that your estate, including your assets and investments, are arranged in the most tax-efficient manner possible.

Source: Reform of inheritance tax

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