A new report from a leading think tank has called for a radical rethink on inheritance tax.
The Mirrlees Review, published by the Institute of Fiscal Studies in September – described as “the deepest and most far reaching analysis of the UK tax system in more than 30 years” – says the government takes around £4 in every £10 earned in the economy through a tax regime that is inefficient, unnecessarily complicated and frequently unfair.
On inheritance tax (IHT), levied at 40 per cent on estates valued at above £325,000, the review says: “There is a case for thinking differently about wealth that is transferred between people – especially as an inheritance between generations.
“The current UK inheritance tax is unfair in many ways – it fails to tax those who pass on gifts during their lifetime and benefits those who can arrange their affairs to escape taxation at death, while taxing more highly those (usually of more modest means) who cannot arrange their affairs so as to avoid taxation.
“It is inefficient because it creates many tax-driven behavioural changes and leads to some asset classes, such as agricultural and business assets, being tax- favoured for no clear reason.
“We do not think that a tax on estates at death is the best way…there is a stronger case, in principle, for a tax on lifetime receipts, taxing transfers received on an ongoing and cumulative basis.”
Clare Hopkins, an associate in the Estate Planning & Tax department at Gregg Latchams and a member of the Society of Trust and Estate Professionals, said: “Clearly, the IHT reform proposed in the Mirrlees Review is radical and implementation of such measures, if the government were minded to do so, would be complex and time-consuming.
“Whether or not IHT does undergo change in the future, it remains the case that seeking expert legal advice on inheritance tax planning is an essential step for anyone seeking to protecting their estate for the benefit of their beneficiaries.”
For more information, please contact the Estate Planning & Tax department.
