The UK inheritance tax (IHT) system has changed considerably since its introduction, and previous rises in residential property prices have resulted in the number of people who may fall within the scope of this tax increasing over time.
IHT is currently charged at 40% on the proportion of an individual’s estate exceeding the ‘nil-rate’ band of £325,000, although a further nil-rate band of £125,000 may be available in relation to current or former residences. Nil-rate bands of surviving spouses or civil partners may also be increased by utilising any unused nil-rate band of the deceased spouse or civil partner.
The Chancellor commissioned the Office of Tax Simplification (OTS) to review a range of aspects relating to IHT, and provide advice on ways in which the tax can be simplified. The review will look at the process relating to submitting IHT returns and paying any tax; various gift rules; estate planning procedures; and complexities arising from the reliefs and their interaction with other taxes.
In March 2018, the OTS published its scoping document, setting out its aims. It intends to publish a report in Autumn 2018, providing an evaluation of the current system and identifying opportunities for improvement.
The government may consider addressing some of the issues raised by the OTS report in the 2018 Autumn Budget.