Inheritance Tax reform in 2019?
We might finally see some progress in 2019 on the promised reform of Inheritance Tax (IHT).
In January 2018 the Chancellor asked the Office of Tax Simplification (OTS) to undertake its review of IHT.
The instruction was, ‘to identify opportunities and develop recommendations for simplifying IHT from both a tax technical and an administrative standpoint’.
In late November, the OTS published the first half of its review.
The report highlights a variety of issues with the current IHT system:
- Executors normally have to pay IHT before probate is granted, which can create difficulty;
- Most of the paperwork cannot be completed and submitted online and is far from user-friendly;
- The residence nil rate band, introduced in 2017/18, has been widely criticised as being ‘very complex’;
- It disadvantages those who do not have children and those who have not owned their own home;
- Although half of all estates submit IHT returns, less than 5% pay tax.
The OTS made a key administrative recommendation. This was that the government should implement an online system for Inheritance Tax with the ability to complete and submit a probate application.
This first report covers ‘administrative issues’ while the second will explore ‘key technical and design issues’.
The second report is due in spring, and could herald changes to tax rules, instead of the administrative framework.
If you haven’t reviewed your estate planning opportunities recently, now might be a good time to do so.