Since the appointment of the new Chancellor, Rishi Sunak, there has been a lot of speculation on the direction of the Budget, announced to take place on Wednesday 11 March. It has very much been a hot topic for me in talking to clients and contacts over the past few weeks and I predict we shall see some changes on the Inheritance Tax (IHT) front, albeit not as radical as those recommended by a cross-party group of MPs very recently.
Their recommendation was a major overhaul to achieve what they perceive to be a simpler and fairer system. Their suggestions include doing away with the current rule of gifts more than 7 years before death escaping IHT altogether and instead imposing a 10% tax on lifetime gifts, as they happen, subject to an annual lifetime gift allowance of £30,000. The tax rate at death would also be 10% after the tax-free nil rate band of £325,000, though could be 20% for estates worth more than £2million. In addition, Business Property Relief (BPR) and Agricultural Property Relief (APR) are proposed to disappear along with all other reliefs and exemptions, such as the tax-free uplift on death for capital gains tax purposes. The implementation of these changes would be a significant shift from the status quo and I do think it is far too soon for such a radical shift to be implemented.
However, there has been time to work through the recommendations from the Office of Tax Simplification report into IHT from last summer and I suspect we will see some of those in the Budget on 11 March. I am hopeful the annual £3,000 gift allowance, which has been frozen at that level for almost 40 years, will be increased to a more meaningful amount and this is long overdue. The gift survivorship period may well also decrease from 7 years to 5 years.
I will certainly be watching with close attention on the day!
Please contact me if you need advice on Inheritance Tax, I can help you plan to pass on wealth in the most tax efficient way.
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