Potential changes to inheritance tax on gifts
The snappily named All-Party Parliamentary Group for Inheritance & Intergenerational Fairness has published a report recommending the abolition of inheritance tax and replacing it with a new regime. Good news?
The APPG proposals would tax lifetime and death transfers of wealth at a flat rate of 10 per cent, compared with the 40 per cent now charged on estates above the current allowances.
The report also recommends replacing the current rules with one annual tax free personal gift allowance of £30,000 with anything above that taxed at 10 per cent immediately upon making the gift.
The current system of potentially exempt transfers (PETs) allows large amounts of wealth to be passed on tax-free during a lifetime, so long as the donor survives for 7 years.
The report proposes abolishing PETs and the 7 year rule so that all gifts over £30,000 each year would be taxed at 10 per cent immediately, rather than tax free after 7 years.
The taxation of trusts would also be simplified and the ability to give away £325,000 tax free every 7 years to trusts would be removed.
The IHT system is complex and is crying out for reform, but for people considering passing on their wealth now who have been waiting for the certainty of Brexit and the result of the General Election this would have the clear consequence of having to fork out some more tax now potentially.
If you need any advice, please speak to Jonathan Hall on 01752 513544 or email jonathan.hall@GAsolicitors.com, about passing on wealth under the current regime to secure the 7 year rule before the opportunity passes.