Tax campaigners want compensation for 28,000 families who have paid inheritance tax under rules that will be scrapped next year because the government has been too slow to bring in the changes.
New inheritance tax rules were announced in April 2015 that come into force from the start of the next financial year.
Meanwhile, rising house prices and increasing numbers of deaths over the winter mean thousands of families have had unexpected tax bills which would have been written off if their relatives had survived until after April 6, 2017.
The problem is a change in inheritance tax thresholds.
Until April 2017, individuals can pass on £325,000 free of tax but pay inheritance tax at 40% on any qualifying amount above the threshold.
The last surviving spouse can pass on £650,000 free of tax under special rules.
How the IHT rules work
The new rules introduce a new tax-free allowance of up to £350,000 for someone passing on their family home to close relatives. This allowance is phased in over three years, starting at £100,00 for individuals and £200,000 for couples.
By April 6, 2020, couples will have a £1 million inheritance tax zero-rated allowance allowing them to pass on a main home valued at up to £350,000 and other assets without paying any tax.
While the government has upped tax free rates, the amount of tax collected has hit a record £4.7 billion mainly due to huge house price increases in London and the South East.
The number of families paying the tax has also risen by four times from around 10,000 in 2010 to 40,000 last year.
HMRC calculates half the families paying inheritance tax live in the capital or surrounding counties.
Jealousy tax
Alan Miller, of financial advisers SCM Private is campaigning for the government to pay compensation to families who would have had reduced bills had the new tax rules been introduced in 2015 rather than April 2017.
“The new IHT allowance is unfair as it penalises some people for dying before others,” he said.
“People don’t decide when they die so the rules should be applied retrospectively from when they were announced. IHT is just a jealousy tax, which is wrong, because taxes should be fair for all.”
hooray I sent a letter to downing street a year ago about this injustice im surprised not more people have picked up on this I was wondering being as it is so unfair is there scope to take the government to court for not proffering a level playing field to all. I for one will be looking at hiring a hot accountant to advise me as in the end no matter his or her fees they will save you a huge amount in the long run so it is worth it. why has the government got to wait until 2020 to change this tax, just put it up to a million now and then its the same for everyone