The Inheritance Tax (IHT) rules could be facing significant changes in the future.
Following Philip Hammond’s request for a review, the Office of Tax Simplification (OTS) has recently published its report.
The findings note there are many areas where IHT “is either poorly understood, counter-intuitive, requires substantial record-keeping, creates distortions, or where the application of the law is simply unclear”.
The OTS came up with 11 recommendations, including the following:
• Substantial reforms to the gifting rules; replacing the annual gift exemption and the marriage gift exemption with an overall personal gifts allowance
• Reducing the seven-year gifting period to five years
• Abolishing taper relief
• Reforming the ‘normal expenditure out of income’ exemption or replacing it with a higher personal gift allowance
However, at this stage, we are still unclear as to exactly what changes will go through the necessary Parliamentary processes and come into force. With all that’s going on in the political world currently, who’s to know when the changes might happen?
One thing we do know, Inheritance Tax planning is a complex area and one that people shy away from thinking about too much. Whatever happens in the future to the rules, it’s well worth giving it some consideration as early as possible. With careful planning there are definite steps that can be taken to minimise tax liabilities or reallocate assets to prevent loved ones paying more than you would want them to.
If you would like to know more about IHT planning, let’s talk about it.