Chancellor Philip Hammond has called on the Office of Tax Simplification (OTS) to carry out a comprehensive review of the Inheritance Tax (IHT) system.
The minister in charge of the country’s finances referred to the regime as “particularly complex” and ordered the OTS to come up with proposals to ensure the system is fit for purpose and make the experience of those who interact with it “as smooth as possible”.
Mr Hammond said the review should include a focus on the technical and administrative issues within IHT, including the process of submitting returns and paying any tax due, as well as practical issues around routine estate planning and disclosure.
Elsewhere, the Chancellor instructed the OTS, which has influenced tax legislation on a number of occasions, to look at how current gifts rules interact with the wider IHT system. He asked the office to investigate whether the current system plays a part in taxpayers’ decisions surrounding transfers, investments, and similar transactions.
How does Inheritance Tax work?
Before the estate is distributed, the executor will need to pay any Inheritance Tax that is due. There’s normally tax to pay if the value of your estate is above the £325,000 threshold, except when it is left to your spouse or civil partner or a charity.
If you give away your home to your children (including adopted, foster, or stepchildren) or grandchildren, your threshold will increase to £425,000 (£450,000 in April 2018).
Any unused threshold can be transferred to a spouse or civil partner, meaning the maximum available allowance is £850,000 (£900,000 in April 2018).
Inheritance Tax is charged at 40 per cent on the part of your estate that is above the threshold. The executor can pay the tax using his or her own funds and claim it back using your assets, or use the available funds from your estate. Click this link for more information on paying Inheritance Tax.
Inheritance tax is inherently complicated
We’ll be happy to answer any questions you might have about Inheritance Tax.
As a firm that specialises in Inheritance Tax planning, our goal is to ensure that you will be passing down your wealth with complete clarity.
What we can do for you:
- Inheritance Tax planning
- Capital gains tax implications
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Remember, it’s never too early to plan for your future. Contact JW Hinks for more information today.