A cross parliamentary group of MPs have urged the government to reduce inheritance tax from the current 40% to 10% for the majority of estates.
Yesterday evening, a All-Party Parliamentary Group (APPG) has encouraged the government to consider serious reforms to inheritance tax in order to reduce the burden for the increasing number of middle class families being dragged into the inheritance tax threshold.
The proposals suggest that the current 40% tax should be reduced to 10% with estates worth over £2 million paying a 20% rate.
The APPG also recommended that tax relief under the ‘seven year rule’ be scrapped, with all wealth transfers, made both on death and in life, taxed at a flat 10%.
Instead of the seven year rule, a £30,000 annual allowance was proposed by the group. Any amount over this figure would then be charged at 10%.
Following a decade of consistently rising house prices and favourable pension schemes, around 1 million people aged over 60-years are teetering on the precipice of an Inheritance Tax (IHT) black hole.
Unbeknownst to the estate owners, increasing equity in property has left a bulk of the nation on the brink of IHT liabilities.
Whilst the government predict that the number is loitering around 1 million people, NFU Mutual has speculated this figure is closer to 1.4 million UK estates valued at somewhere close to or in excess of the current inheritance tax threshold.
The APPG believe that the system needs reprising to ensure that those who cannot afford to pay the tax and may not have the foresight or finances to seek advice on the issue are not left to pay excessive taxes.
Michael Culver, Chairman of specialist legal group, SFE (Solicitors for the Elderly), commented:
“The proposals from the APPG on inheritance tax reform are encouraging, and would bring about a refreshing change to the system. Whilst the legal profession could be negatively impacted, as people may decide to no longer seek tax planning advice, it would certainly leave families much better off. I do however question whether the proposals will see the light of day. Not only is the inheritance tax system complex, meaning an overhaul wouldn’t be straightforward, but inheritance tax contributes a huge amount to public finances, so I’m not convinced the Treasury would be happy with such a loss to public funding.”
Emily Deane, technical counsel at STEP commented:
“The IHT system is hugely complex and we are strongly supportive of reform. The APPG’s report is a welcome addition to this debate as the government weighs its options.
“STEP welcomes any measures to simplify the current inheritance tax regime, thereby decreasing opportunities for avoidance and abuse.”
