This is the latest development in this hotly debated topic. A group of cross party MPs have proposed a 10% inheritance tax rate – 20% for estates over £2m. This follows recommendations made by the Office for Tax Simplification last summer.
The proposals also call for exemptions such as Business Property Relief (BPR), Agricultural Property Relief and Capital Gains Tax uplift to be abolished which would have significant implications for families inheritance tax planning.
The recommendations include:
- Abolition of Potentially Exempt Transfers –all transfers except those between spouses and civil partners would be chargeable to tax, subject only to an annual exemption of £30,000: effectively a return to Capital Transfer Tax
- Abolition of most special reliefs including Business Property Relief and Agricultural Property Relief
- Removal of the CGT rebasing to market value on death
- Removal of the “main residence” enhancement to the IHT Nil Rate Band
- Removal of the Nil Rate Band from lifetime transfers, leaving it to be available only on death
- Reduction of the rate of tax to 10%, except that the rate applying on death for estates over £2m would be 20%
- Inclusion of the value of pension funds in the death estate unless they pass to a surviving spouse or civil partner
- Introduction of an annual tax charge on discretionary trusts
- Compulsory electronic reporting to HMRC of all lifetime gifts over £3,000
We are following these developments closely and are waiting to see if any announcements are made in the Budget on 11th March. We’ll publish further guidance as changes are announced. It is likely that there were be a consultation period before any changes are made, however we recommend you discuss any concerns with your tax adviser or contact us at firstname.lastname@example.org.