Inheritance Tax  

Seven-year IHT rule could be reformed

Kathryn Cearns, the OTS chairman said: "Although only a small number of people pay Inheritance Tax each year, a far greater number worry about it.

"The OTS’s packages of recommendations would go some way to achieving the goal of making the tax easier to understand and simpler to comply with."

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Rachael Griffin, tax and financial planning expert at Quilter, said: "The OTS suggests the government get rid of the capital gains tax uplift on death. In other words if they sell the asset they will be subject to CGT on the gains made.

"This will drastically increase the number of people who inherit things they can’t afford and means that someone who was responsible enough to buy a property and hold on to it will not be able to let their loved ones benefit fully from the growth of that property.

"Again the rationale here seems sound, that the CGT uplift encourages people to hold onto assets until they die and restricts the flow of assets through generations.

"However, changing the rules on CGT isn’t the way to tackle this issue. If anything it exacerbates intergenerational inequality."

The OTS is the independent adviser to government on simplifying the UK tax system. It makes recommendations for the government to consider but does not implement changes.

The OTS stated its consultation had generated an "unprecedented level of interest", which had made it clear "that many people had limited understanding about the way Inheritance Tax works".

There were nearly 3,000 responses to an online survey, a further 500 emails from individuals and more than 100 written responses from experts, it stated.

The first report, which dealt primarily with the administration of Inheritance Tax, was published in November 2018.

The review had been requested by chancellor Philip Hammond in January 2018.

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