Why making a will or lasting power of attorney is important at every age
Call to scrap Inheritance Tax and replace with a gift tax
In a recent report published by the Commission for Economic Justice, they are calling for IHT to be scrapped altogether and replaced with a gift tax. The gift tax would allow an individual to give away £125,000 free of IHT during their lifetime but anything above this would be subject to income tax. The report proposes a basic rate of 20% and a top rate of 30% for lifetime receipts over £500,000. This is compared to the current IHT allowance of £325,000 per individual, increasing to up to £500,000 per individual by April 2021, so long as they leave their main residence to their direct descendants.
In addition, the Commission suggest the reform of Business Relief and Agricultural Property Relief by introducing a cap, so the relief is only available up to a certain level, with the introduction of a clawback of the IHT that would have been paid, if the asset is sold soon after death.
The Commission’s view is that this could raise an additional £5 billion per year (instead of the current £6 billion projected for IHT). Their proposal is to then create a Citizens Wealth Fund, use to help the younger generation get their foot on the property ladder or starting a business by them receiving a universal minimum inheritance of £10,000 at the age of 25.
The Commission’s view is that this would avoid the seven year ‘loophole’ with gifting where the value of the gift falls outside of the estate, if the date of the gift is survived by seven years. In addition, it would remove a tax being paid on death, by introducing a lifetime tax.
In addition to this, the report suggests increasing Capital Gains Tax and Corporation Tax.
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