Thinking about the Budget coming up on 29th October, it will be interesting to see if the Chancellor’s call for a review of inheritance tax (IHT) in January will materialise as a real simplification.
The need to avoid gradual changes was emphasised to ensure we did not impose another layer of tax legislation. We might assume, therefore, that the review will produce some very significant changes. The legislation has certainly become complicated over the years. It is also unpopular and considered unfair, according to research.
In May the Resolution Foundation’s Intergeneration Commission issued a report which pointed clearly to the abolition of IHT and its replacement by something simpler and fairer – a tax on the recipients of gifts, with, say, the first £125,000 of accumulated inheritances and gifts through their life being tax-free.
The potential streamlining would cover Agricultural and Business Property Relief as well as current differences in taxation of lifetime gifts, trusts, pensions and capital investment bonds.
Interestingly, the report has been supported by another think-tank, the Institute for Public Policy Research Commission on Economic Justice in their report published this September.
Allowing for small gift exemption and a reduction in the tax rates applied, the potential to raise considerable additional revenue for the Exchequer has been calculated.
These changes might be irresistible to the Chancellor in these difficult times.