Inheritance tax (IHT) receipts are expected to reach another record high for the 2018-19 tax year, putting pressure on chancellor Philip Hammond to reform the system.
Inheritance tax (IHT) receipts are on course to hit a fresh record high, which will put further pressure on chancellor Philip Hammond to reform the system.
In the first six months of the 2018-19 tax year IHT receipts stood at £2.8 billion. Analysis by the Office for Budget Responsibility estimates that for the full tax year IHT receipts will come in at a record £5.4 billion, up from £5.3 billion in 2017-18.
Earlier this year, Hammond ordered the Office of Tax Simplification (OTS) to carry out a review of IHT, to ensure the system is fit for purpose. The consultation has been concluded and a report is expected to be published shortly, potentially before the Budget next Monday (29 October).
Hammond has asked the OTS for recommendations to ‘simplify’ the system, which is fiendishly complicated.
Moreover, since 2009 the IHT threshold has been static at £325,000, which has been one of the big drivers behind IHT receipts rising to record levels.
Sean McCann, a chartered financial planner at NFU Mutual, is one of a number of experts, who argues the threshold now looks ‘outdated’ and should be changed.
Rather than increasing the threshold, McCann advocates replacing all the existing exemptions with one single annual exemption of at least £10,000, which would increase in line with inflation.
He adds: “Personal finances have moved on a great deal in the last 32 years, and it’s about time the limits and exemptions matched the needs of 21st-century families.
“These numbers show people are passing on more and more to the taxman rather than their loved ones. The OTS report on inheritance tax is imminent and it’s likely the chancellor will want the recommendations to be part of his Budget considerations.”