Inheritance Tax needs to be ‘simplified’, says Chancellor
In recent days, the Chancellor, Philip Hammond, has penned a letter to the Office of Tax Simplification (OTS) calling for changes to the UK’s “particularly complex” Inheritance Tax (IHT) regime.
On 19 January, the Chancellor requested that the OTS carry out a review of the existing IHT framework, with a focus on “simplification” and ensuring that the “system is fit for purpose.”
Specifically, he said that the OTS ought to consider how current rules in relation to gifting interact with the wider IHT system and whether the existing regime is simply too confusing for Britons to fully and effectively engage with.
“I would be most interested to hear any proposals you may have for simplification, to ensure that the system is fit for purpose and makes the experience of those who interact with it as smooth as possible,” he wrote.
The comments come at a time when studies and media reports continue to suggest that British families do not fully understand how IHT works.
Towards the end of 2018, a study carried out by OneFamily found that grandparents were unaware of the IHT implications of gifting lump sums to their grandchildren.
A few months later, separate research carried out by Canada Life found that 55 per cent of Britons were unaware of the 40 per cent rate at which IHT is levied on estates in England and Wales, while two thirds did not understand that total assets valued at less than £325,000 were IHT-free.
Inheritance Tax is complex and confusing, and each person’s situation will always be different to the next. This is why it is important to seek specialist, tailored advice when it comes to IHT and estate planning.