Inheritance Tax  

Adviser calls on govt to speed up IHT review

The nil rate band, also known as the IHT threshold, is the amount up to which an estate has no IHT to pay. The NRB for 2019/20 is £325,000 and any estate which exceeds this threshold is charged 40 per cent IHT.

Unused NRB and residence nil rate band can be transferred to a surviving spouse or civil partner.

NFU Mutual has called for the RNRB to be abolished as those who do not have children do not get this tax break and complex rules may catch individuals out.

The firm stated: "The current rules also have a number of traps for the unwary - the allowance is reduced if you have an estate worth more than £2m and lost completely at £2.3m, you can lose it if you’ve created certain types of trusts in your will.

"There are also unnecessarily complex rules to negotiate if you downsize your property or move into residential care."

Currently individuals can make gifts that are immediately exempt from IHT even if they die the day after making them, such as gifts on marriage and gifts out of ‘normal expenditure’ but many people aren’t aware of many of these exempt gifts, said NFU Mutual.

The firm stated: "Introducing one simple annual exemption would not only be easier to understand but would encourage the older generation to pass money down earlier, sharing wealth within the family."

Mr McCann said: "For far too long now, IHT rules have been feared by too many and understood by too few. 

"Policymakers now have a golden opportunity to address the issue with a bold new approach, which is simpler to understand and administer. 

"Reducing the rate from 40 to 30 per cent might also go a long way to shifting perceptions of IHT, which is seen by many as a punitive tax."

A review of IHT rules is currently underway as the Chancellor is keen to simplify the underlying structure of the tax. The first report out last November recommended the government should move to a fully digital system for inheritance tax.

The second section, which will deal with the overall design of the system, is expected to be released in due course.

In April, IHT receipts accounted for £473m, down from £537m in March 2019, showing a decline of 12 per cent.

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