New focus on inheritance tax
The government has requested a review of inheritance tax to make the system less complicated.
The Chancellor, Philip Hammond, has asked the Office of Tax Simplification (OTS) for “proposals… for simplification, to ensure that the system is fit for purpose”.
The OTS has been asked to “focus on the technical and administrative issues within IHT,”so it is looking for simplification options, not a radical reform. The Chancellor may not reduce IHT revenue, as the tax is forecast to raise £5.4 billion in 2018/19.
Appropriately, the OTS did have a look at IHT when developing its ‘Complexity Index’ in 2015. The index examined over 100 aspects of UK taxation, assessing their complexity and its impact. Unsurprisingly, IHT ranked third for complexity, behind two sets of capital gains tax computation rules.
If the OTS repeated the exercise today, IHT could well come first because of the extra complexity added by the residence nil rate band (RNRB) and its associated downsizing rules.
You should not defer your estate planning because of the impending OTS review. If you have not reviewed your will since the RNRB started life in April 2017, now is the time to do so. The RNRB could save your estate up to £70,000 in tax (up to £140,000 for a couple) by 2020/21, but the relief is far from straightforward. The end of the tax year also offers opportunities to use your annual IHT exemptions, as covered in our feature article.
The Financial Conduct Authority does not regulate tax advice. Levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate will writing, trusts and some forms of estate planning.
The information in this article does not constitute advice and should be used for informational purposes only. This content has been provided to Helm Godfrey by Taxbriefs.