The confusing array of inheritance tax rules on giveaways to loved ones should be swept away and replaced with a single ‘personal gift allowance’, say Government officials
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The confusing array of inheritance – http://browse.deviantart.com/?q=inheritance tax rules on giveaways to loved ones should be swept away and replaced with a single ‘personal gift allowance’, say Government officials.The ‘seven-year’ rule for large gifts, which means that if you survive the money gradually becomes free of inheritance tax, should be axed in favour of a set five-year period, says the Office of Tax Simplification.An exemption for wedding presents should be dropped, and one for giving away money out of your income either reformed or abandoned, according to its new report.The report arrives on the heels of far more controversial plans floated by Labour to overhaul inheritance tax, which would remove a couple’s ability to own marriage leave application – http://lettershopworlds.mybloglicious.com/18493935/successful-parenting-requires-a-successful-marriage almost £1million tax-free and replace the current IHT system with a £125,000 per person lifetime gift allowance.
Above this level income tax rates would apply. Confusing system for families: Chancellor Philip Hammond ordered a review of inheritance tax and whether it ’causes any distortions to taxpayer decisions’Inheritance tax is one of the most hated taxes, with the Office of Tax Simplification noting that it ‘appears to be almost uniquely unpopular’.
It is also considered to be overly complicated and an outsized burden on people.Just 5 per cent of bereaved families pay the ‘death tax’ on estates over a certain level, yet half have to fill in the form to notify the taxman even when there is nothing to pay.More are expected to be dragged into the inheritance tax net, however, with the Office of Budget Responsibility forecasting the government’s tax take will rise almost a third from £5.2billion in 2017 to 2018 to £6.9billion in 2024. RELATED ARTICLES Previous – # 1 – # Next – # 10 ways to avoid inheritance tax: How to stop the taxman… – /money/pensions/article-4985392/How-avoid-inheritance-tax-legally.html Make inheritance tax forms simpler! Government tax gurus say… – /money/pensions/article-6421511/Make-inheritance-tax-forms-simpler-say-Hammonds-Government-gurus.html How the very rich pay a lower percentage of inheritance tax – /money/comment/article-6439229/Why-inheritance-tax-mess-rich-pay-less.html What should we do about inheritance tax – and is it time to… – /money/podcast/article-6447729/What-inheritance-tax-Listen-Money-podcast.html Share this article Share HOW THIS IS MONEY CAN HELP What you need to know each week: Listen to the This is Money podcast – A complicated set of annual gift exemptions that have not risen in many years, leaving figures for gifts each year looking outdated, were recommended to be scrapped and replaced with a sole annual gift allowance.The Office of Tax Simplification, which was tasked with reviewing the current regime by Chancellor Phillip Hammond, said it was not its job to recommend a new personal gift allowance set at any particular level. But it suggested there should be no rollover of unused annual limits, to aid in the goal of simplification, and added ‘there may be merit in acknowledging the impact of inflation since the original limits were set’.’Many of these exemptions have been frozen at the same level since the early 1980s (the annual £3,000 exemption hasn’t changed since 1981)’, said Sean McCann, chartered financial adviser at NFU Mutual. Exemptions, such as for small gifts at £250 and annual gifts at £3,000, have been the same for many years and would be £1,010 and £11,900 respectively if they had been raised in line with inflation. See the chart below. The OTS has previously recommended that inheritance tax forms should be overhauled to make them shorter and simpler as a first step to improving a burdensome system, in the first report arising from its review.Today’s second report, which also suggests changes to how capital gains tax interacts with inheritance tax, and rules on bequeathing businesses and farms, comes just ahead of Hammond’s likely departure from the Treasury.It is uncertain whether his successor, appointed by one of the current Tory leadership contenders – or a Labour Chancellor in the event of an election and change of government – will take up its recommendations.But the OTS, which is an independent arm of the Treasury that focuses on improving tax administration as well as simplifying the rules, made clear that it believes the inheritance tax system requires an overhaul.’The OTS’s extensive consultation exercise revealed many areas where inheritance tax is either poorly understood, counter-intuitive, requires substantial record keeping, creates distortions, or where the application of the law is simply unclear,’ it said.
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