Experts charged with overhauling the rules over how inheritance tax is charged have issued a plea for help.
They want families and professionals who have recently dealt with distributing money and assets from an estate to come forward with ideas about how to streamline the process.
The Office of Tax Simplification (OTS) was ordered to conduct an IHT review by Chancellor Phillip Hammond.
He says IHT rules are too complicated and make writing wills and making gifts to loved ones without triggering tax confusing for most people.
The review is considering how the law works and the administrative processes through which taxpayers interact with HM Revenue & Customs in relation to IHT.
Tax take rises to £5.2 billion
The OTS expect to publish their report in the autumn.
“While tax rates are for government, the role of the OTS is to challenge tax complexity and so help all users of the tax system, and so we hope to hear from as many individuals as possible. We are keen to hear both from those who have had some experience of dealing with Inheritance Tax and those who are concerned about it, but who may be unfamiliar with it,” said OTS tax director Paul Morton.
“We know that there is a great deal to consider and we want to explore this with the help of individual taxpayers, as well as professional advisers and representative groups.”
The deadline for submitting evidence is June 8.
Although the government claims only 5% of estates pay IHT, the amount of tax paid has increased in recent years despite the amount someone can leave without triggering tax rising.
The latest official figures show £5.2 billion was paid in IHT.
Time to reconsider
Couples can currently pass cash and assets of £850,000 on to loved ones – comprising the £650,000 nil rate band and £200,000 main residence relief, which is rising to £350,000 by 2020.
Critics argue the government needs to revamp IHT and look at many of the reliefs and allowances that have not changed in years.
“It’s time for the financial industry to ask government to reconsider the £325,000 nil rate band which was last reviewed in 2009,” said Johnny Timpson, a specialist at financial firm Scottish Widows.
“We have had the complex main residence nil rate band that kicked in from April 2017, but this will deliver no benefit for most. It would be beneficial for many if government also reviewed the £3,000 annual exemption, which was last looked at in 1981; the £5,000 wedding gift allowance, last reviewed in 1975; and £250 small gift allowance, unchanged since 1980.
“Let’s not forget, back in the day in 1981 when the average home cost £24,000, a £3,000 gift would have made for decent deposit. In 2017, that same £3,000 would only meet a few weeks of mortgage and household running costs now.”
