You are here: Home - Retirement - Retirement planning - News -

Resolution Foundation proposes full overhaul of IHT

0
Written by:
02/05/2018
The Resolution Foundation has called for the government to abolish Inheritance Tax and replace it with a Lifetime Receipts Tax, paid by the beneficiary.

The Foundation is responding to the review launched this week by the Office of Tax Simplification, which is looking at ways inheritance tax can be made fairer and more efficient.

Under the Resolution Foundation proposals, every person would have a Lifetime Receipts Tax Allowance of £125,000. From there, a progressive rate of tax would apply with a basic rate of 20% and a higher rate of 30% above £500,000.

All lifetime gifts would be included in the tax, excluding those of £3,000 or less. At the moment, gifts are exempt after seven years. Transfers between spouses would remain exempt.

The Foundation estimates that in spite of lower marginal rates, the new tax would raise £5bn more than inheritance tax in 2020/21. It also recommended that existing reliefs such as Business Property Relief and Agricultural Relief (which together cost £1.2bn), the treatment of inherited pensions, and the forgiveness of Capital Gains Tax at death (costing another £1.2bn) should also be tightened to reduce the scope for tax avoidance.

Matthew Whittaker, an analyst at the Foundation, said: “It takes something to be crowned Britain’s most hated tax – a bit like being the UK’s worst ever Eurovision entry – but that is the unwanted title held by inheritance tax. It doesn’t help that it’s a tax that’s unavoidably associated with the death of loved ones. And complexity is undoubtedly a problem too. But by far the biggest issue is the sense of inherent unfairness – there’s something fundamentally off-key about inheritance tax.

“Just one-in-five of us think the current approach is ‘fair’ – somewhat lower than for any other tax. It’s viewed as a double taxation of those who have earned the wealth and who have now had the temerity to die and pass their assets onto grieving families. With a flat rate of 40 % (above the nil-rate band), it’s also considered high…But it’s also regarded as a tax that is ‘voluntary’ for the super-rich and well-advised, with a range of reliefs and gifting rules that make it too easy – for some – to avoid.”

He added that inheritances are set to play a growing role in Britain’s living standards story over the coming years. The current value of inheritances is double what it was 20 years ago, and it is expected to double again in the next two decades.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

  • According to @YourMoneyUK the #Govt is considering a Care ISA’ which would be exempt from #inheritancetax. Could th… https://t.co/hPVZZfdyDr
  • RT @unitetheunion: “We need tough action against unscrupulous debt collection agencies who prey on people’s misery to ramp up the debt thro…
  • RT @unitetheunion: “We need tough action against unscrupulous debt collection agencies who prey on people’s misery to ramp up the debt thro…
Read previous post:
2266975-isles-of-scilly-aerial-shot-bt-broadband-fibre-islands-five
British offshore territories respond angrily to public register calls

The government says it will not oppose measures to increase transparency in offshore tax havens, including the introduction of public...

Close