Albert Goodman accountants call on Chancellor to use Budget to make inheritance tax ‘fairer'
Released On 9th Mar 2024
South West-based accountants Albert Goodman are urging Chancellor Jeremy Hunt to use the spring Budget to make Inheritance Tax (IHT) “fairer and simpler”.
Ahead of Wednesday’s unveiling of the Budget, IHT has been the subject of much media speculation with the prospect of its abolition even being touted in some sections of the media.
But Albert Goodman tax specialist Ruth Powell insists that the country would be better served if the Chancellor took steps to modify IHT rules to make it more even-handed.
IHT is a tax on the estate - property, money and possessions - of someone who has died and applies when the value of the estate is above a £325,000 threshold. The standard IHT rate is 40 per cent on the estate above the threshold right across the board. The government also introduced in 2017 the residential nil rate band giving an additional relief of up to £175,000 for those passing their family home to direct descendants.
Powell, who is based at Albert Goodman’s Bristol office, said: “At the moment, Inheritance Tax is due an overhaul. The rules around the residential nil rate band are extensive and complex and we see many families and executors seeking our assistance to determine whether an estate can benefit from the relief. The relief was bought in for the lower value estates under £2m but the complexities can mean estates suffering professional fees as clients try to navigate the requirements to qualify.
“The current 40 per cent applied to all above the available threshold is a blunt instrument and the Budget represents a golden opportunity for the Chancellor to create a more just form of taxation, potentially starting with a more progressive model with scaling thresholds as property prices rise.
“We know that most of our clients are agreeable to paying some inheritance tax as it’s been a part of our tax system for many centuries. They just don’t relish losing 40 per cent to the taxman. “There is a variety of measures the Chancellor could take to remove loopholes and inconsistencies to make IHT less confusing for those dealing with estates, after all, the probate application has been simplified over the last few years, it would be lovely to see that same simplification applied to IHT allowances, perhaps merging the £325,000 nil rate band with the £175,000 residential nil rate band and making this relief available to all” Ruth added.
“At the moment, there is an array of gift exemptions and allowances that can be baffling but have also remained unchanged for many years. If allowances were to increase, it would encourage more people to think about how they can support family members earlier during their life, rather than being deterred from making lifetime gifts.
“It’s time to evaluate all these allowances to provide individuals with clearer guidelines on effects of gifting during their lifetime and reliefs available on their estate at the time of death”.
