MPs suggest radical revamp for inheritance tax
The current 40% inheritance tax rate is "unfair" and should be reduced to 10% in the Spring Budget, a cross-party group of MPs has claimed.
Inheritance tax usually kicks in when the value of an estate exceeds the tax-free threshold of £325,000.
Each year, an increasing amount of estates are having inheritance tax deducted before what's left is distributed to any beneficiaries or causes.
Total duties raised from inheritance tax reached a new record of £5.4 billion in 2018/19, representing a 3% rise on the previous year.
With the number of estates being taxed on the rise, Chancellor Sajid Javid has previously dropped hints that reform could be in pipeline next month.
And the All-Party Parliamentary Group (APPG) on Inheritance Tax and Intergenerational Fairness has gone a step further.
They claimed the current system, which has been unchanged since 2009/10, is "unpopular and ripe for reform".
The group suggested scrapping most inheritance tax reliefs and introducing a new flat rate of 10%, rising to a maximum of 20% on death for estates of more than £2 million.
The group said there is evidence showing rates above 20% incentivise tax planning and by cutting rates the rules would lead to less tax avoidance.
The APGG report's executive summary said:
"The key principle is that it should be low enough for the tax to be broadly based without the need for complex reliefs.
"A flat-rate gift tax with fewer reliefs would be simpler, more broadly based, lead to less avoidance and ensure the UK's competitiveness in attracting wealthy people to live (and die) in the UK."
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