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Will Inheritance Tax be simplified?

Date posted: 5th Feb 2020

Another announcement to listen out for in the Spring Budget is whether the Chancellor acts on the recommendations of the Office of Tax Simplification (OTS) regarding inheritance tax (IHT). As reported in an earlier newsletter, the OTS suggested simplifying IHT on lifetime gifts including reducing the period of potential exemption from 7 to 5 years. Such a change would mean that the donor would only be required to survive for 5 years following a gift for the transfer to be exempt from IHT.

The OTS also suggested that the conditions for Business Property Relief might be tightened up by aligning the rules with the definition of a trading company for CGT. This relief currently provides 100% relief on the transfer of shares in an unquoted company.

The suggested change would mean that more transfers of shares would potentially be liable to IHT and may require a careful review of your plans if you are looking to pass on your business.

 

Want to read more on Inheritance Tax?

Gifts out of Surplus Income – Inheritance tax only applies to gifts of capital. There is currently a very generous exemption from inheritance tax for regular gifts out of income.

 

If any of the updates in this article raise any issues for you or your business, please contact our Tax team.


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