As part of the review, more than 3,500 people were asked to provide their views on inheritance tax. One of the biggest concerns that came out of the review was that the richest manage to avoid paying IHT because they pay advisers to help them find a way around it – for example, by putting assets into trusts. This leaves the middle class hit the hardest by the tax.
The latest tax receipts show that HMRC is on course to take £5.5 billion in IHT this tax year, with £3.3 billion taken between April and October.
However, despite the headline rate being payable at 40%, the rate actually paid peaks at 20%, falling to 10% for the largest estates. This is because larger estates are often covered by reliefs, whereas lower value estates which mostly consist of cash and residential property, do not.
There is also the point made that the wealthier can afford to give more away during their lifetime, as they don’t need it to sustain their lifestyle. This reduces their IHT bill when they die. And again, the middle classes are less able to do this.
The recommendations from the OTS review propose:
Introducing a digital system for inheritance tax and probate
Reducing the amount of information needed for simple estates
Making it easier to obtain probate for low-value estates
Issuing automated receipts for information received and automatically acknowledging inheritance tax payments
Producing clearer guidance for executors of Wills
Standardising procedures for financial bodies releasing assets
Making it easier to draft Wills
(Source: Office of Tax Simplification)
Looking for help with regards to inheritance tax?
Inheritance tax can be confusing – especially when it needs to be dealt with at a time when people are generally feeling stressed and vulnerable. It is for the executor of the Will, or their representative, to calculate the estate’s assets and gifts (using a professional valuer for anything worth over £500) and all the liabilities/debts.
Until IHT is paid and all the relevant forms submitted, probate cannot be granted and the assets of the estate cannot be distributed. However, the IHT must be paid within six months of the death, while the deadline for forms is within a year. So, you can see how the whole process can be difficult and confusing for people – which is why a lot of people prefer to get a probate professional to help them.
Thanks to a recent change in regulations, Accountants are able to help with probate – but only if they have the necessary probate authorisation – as Get Probate have.