Chancellor Philip Hammond has written to the Office of Tax Simplification asking for a review of inheritance tax (IHT).
The aims are:
- A simpler, fairer and better system
- A focus on technical and administrative issues such as submitting returns and paying tax due
- A look at how the current gift rules interact with the wider IHT regime
- Whether the current framework distorts decision making – the big recent change here being pensions, now far more tax efficient on death than ISA
The terms of reference for the review are to be agreed. Change is unlikely to be quick or without a consultation with industry.
Sarah Coles, personal finance analyst, Hargreaves Lansdown; “Hammond suggests the Office of Tax Simplification looks at whether the current inheritance tax framework distorts decision-making, well we can save them the time, because of course it does. The tax framework distorts people’s behaviour and financial decisions, and inheritance tax is no exception.”
“Anyone who has ever wrestled with estate planning and inheritance tax can appreciate that the whole system can be a nightmare of complexity. The pension freedoms and the additional residence nil rate band may have reduced IHT for many, but they have made things much more complicated rather than less, so it’s about time someone took a big red pen to the myriad of rules and regulations.”