“Inheritance tax regime must move with the times”

Feb 24, 2023 | Tax

In my experience, some worry too much about Inheritance Tax, others not enough. Most married couples who own their own home have a £1m allowance and even with ‘soaring house prices’, a majority fall below the limit. The allowances, however, have been frozen, and many of the extras, the £3,000 you can give away each year and £250 for gifts to as many different people as you wish, haven’t changed for nearly 40 years. Indeed, the main allowances haven’t changed since 2009, and would be 40% higher had they kept pace with inflation (yes, that’s how much 14 years-worth is even at low rates!) The IHT rules are an extremely tangled web already, and of course those whom the original ‘Death Duties’ were established to hit, the landed gentry and super-rich, have always been pretty adept at avoiding most forms of tax. And so, yes, it’s the squeezed middle who suffer. As always. And who usually don’t notice and keep voting to suffer.

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“Labour drops LTA reintroduction plans”

“Labour drops LTA reintroduction plans”

So here’s a horny dilemma. The Lifetime Allowance was (mostly) abolished in the last Budget. I say mostly, because the limit on how much tax-free cash you can take from a pension is still in place as are one or two other, arguably anachronistic elements of one of the most complex elements of the extremely complex pension rulebooks.

“Tories pledge ‘triple lock plus’ tax cut for pensioners”

“Tories pledge ‘triple lock plus’ tax cut for pensioners”

If the State Pension does keep rising with the Triple-Locked highest measure of inflation, and the income tax allowance remains frozen, it might indeed not be long before the pension is more than the allowance and so becomes taxable. For those with other pensions, it would mean a change of tax code, and more tax taken from one or more of those others. But many, and there are many, whose

“Business Relief in IHT planning set to become ‘even more important'”

“Business Relief in IHT planning set to become ‘even more important'”

For most who might leave an Inheritance Tax bill to pay when they depart, there aren’t that many ways to get around it. For most leaving their money to kids with house making up most of the value, it boils down to giving away the assets you don’t live in and hanging on for seven years, giving some to charity or taking it on the chin and setting up life insurance to provide the funds.