Cut inheritance tax to just 10pc, MPS’ group tells Government

INHERITANCE tax rates should be cut to just 10 per cent as part of a radical reform of the duty, a cross-bench group of MPS have recommended.

The All-party Parliamentary Group on Inheritance Tax and Intergenerational Fairness has asked the Government to consult on reforms to stamp out avoidance by the ultra-wealthy and ease the burden on the middle class.

The group, set up to lobby for change last year after Philip Hammond, then the chancellor, asked for a review of the system, said all but the most vital reliefs should be scrapped.

It said all estates above the existing tax-free threshold should be taxed at just 10 per cent, while those worth more than £2 million would pay 20 per cent. Currently, estates are taxed at 40 per cent for anything over £325,000.

The “seven-year gifting rule”, which allows large transfers of wealth to be passed on tax free if the person survives for at least seven years, would also be abolished. And getting rid of 100 per cent relief on farms and other existing tax breaks would close loopholes exploited by the wealthiest.

The proposals come as more people than at any point in the past decade are paying inheritance tax. Rising property prices and the freezing of the £325,000 threshold since 2009 have dragged more middle class families into the net and driven the annual tax haul to a record £5.4billion.

John Stevenson, the Tory who chairs the group, said the existing regime was too complex and an “unfair penalty on hard-working savers”, while its proposals would ensure the rich paid their fair share. A government spokesman said the findings would be considered.