South West accountancy firm Albert Goodman is calling on Chancellor Jeremy Hunt to use Wednesday’s Budget to reform Inheritance Tax (IHT) to make it more even-handed.
IHT has been the subject of much media speculation recently, with the prospect of its abolition even being touted by some commentators.
But Albert Goodman tax director Ruth Powell, pictured, insists the country would be better served if the Chancellor took steps to modify IHT rules to make it ‘fairer and simpler’.
IHT is a tax on the property, money and possessions – or estate – of someone who has died. It applies when the value of the estate is above a £325,000 threshold.
The standard IHT rate is 40% right across the board. In 2017 the government introduced the residential nil rate band, giving an additional relief of up to £175,000 for those passing their family home to direct descendants.
Ruth, who is based at Albert Goodman’s Bristol office, said Inheritance Tax was due an overhaul.
“The rules around the residential nil rate band are extensive and complex and we see many families and executors seeking our assistance to determine whether an estate can benefit from the relief,” she added.
“The relief was bought in for the lower value estates under £2m, but the complexities can mean estates suffering professional fees as clients try to navigate the requirements to qualify.”
Describing the current 40% applied to all above the available threshold as a blunt instrument, she said the Budget represented a golden opportunity for the Chancellor to create a more just form of taxation, potentially starting with a more progressive model with scaling thresholds as property prices rise.
“We know that most of our clients are agreeable to paying some inheritance tax as it’s been a part of our tax system for many centuries,” Ruth said.
“They just don’t relish losing 40% to the taxman.
“There are a variety of measures the Chancellor could take to remove loopholes and inconsistencies to make IHT less confusing for those dealing with estates.
“After all, the probate application has been simplified over the last few years.
“It would be lovely to see that same simplification applied to IHT allowances, perhaps merging the £325,000 nil rate band with the £175,000 residential nil rate band and making this relief available to all.”
Ruth said that at the moment, there was an array of gift exemptions and allowances that could be baffling but had also remained unchanged for many years.
“If allowances were to increase, it would encourage more people to think about how they can support family members earlier during their life, rather than being deterred from making lifetime gifts,” she added.
“It’s time to evaluate all these allowances to provide individuals with clearer guidelines on effects of gifting during their lifetime and reliefs available on their estate at the time of death”
Albert Goodman, which has its headquarters in Taunton, has been helping people across the South West for over a century.
As well as its Bristol city centre office on King Street, it also has offices in Yeovil, Weymouth and Weston-super-Mare.
