In a recent consultation, more than 3,500 people gave their views on Inheritance Tax (IHT) and their verdict was that it was uniquely unpopular and complex in its operation.
In addition, the amount of paperwork involved represented an additional burden to families at a time when they were dealing with the loss of a loved one. IHT raised £5.2bn in 2017. This figure is expected to be £6.9bn in 2023 24.
Who pays the tax?
The standard Inheritance Tax rate is 40% and is only chargeable on the part of your estate above that threshold. However, after allowances, spouse and civil partner exemptions and available reliefs, the rate payable is less. For example, estates with a net value of less than £1m, will pay IHT at 5% (average percentage after allowances). Whilst estates worth between £3m – £7m pay 20% (average percentage after allowances). Estates valued at £10m or more pay 10% (average percentage after allowances), an indication that those with large estates are more likely to seek advice about making lifetime gifts and setting up trusts to lessen the impact of the tax.
The Office of Tax Simplification has been tasked by the Chancellor to make IHT simpler and more streamlined, and to review the rules on gifting, pensions and property.