Hammond tax review could become stealth raid on inheritances
MIDDLE- class families could end up losing more of their estates to death duties in a Treasury tax raid, experts warned last night.
Philip Hammond has ordered a review of the entire inheritance tax system, describing it as ‘particularly complex’.
But tax specialists fear the Chancellor’s plans to simplify the system could lead to a stealth raid on family wealth.
Sean McCann, of the insurer NFU Mutual, said: ‘This could quite easily be a money-making opportunity for the Chancellor, especially if he looked at some of the inheritance tax reliefs which are currently quite generous. It could end up being quite lucrative.
‘It could be a case of the Government giving with one hand and taking away with another.’
Mr Hammond has asked its independent adviser the Office of Tax Simplification to find ways of ironing out quirks in the system so families can understand what they owe.
It is understood the review will consider changes to the £325,000 tax-free threshold for individuals, as well as the planned £1million threshold for couples.
It will also look at a complex rule that makes gifts tax-free after seven years and the annual gift allowances available to those who want to help younger relatives on to the property ladder or pay university fees.
Ian Dyall, of the financial advice firm Tilney, said: ‘Simplification often turns out to be a euphemism for revenue generation. This review should not be an attempt to simply raise inheritance tax revenues, which have been steadily rising due to increased property prices and a fixed nil rate band.’
Sarah Coles, of the investment firm Hargreaves Lansdown, said the shake-up could be positive if it signalled the end of a complex system. But she added: ‘This has the potential to be a money- making opportunity. Governments are always looking for an opportunity to take extra tax off people – it would be naive to think it wasn’t one of the things on their minds.’
The Treasury is projected to collect £5.3billion in inheritance taxes this year.
Tax is charged at 40 per cent on estates worth more than £325,000 for an individual or £650,000 for a couple.
There is now also an extra allowance for bequething a property, taking the overall threshold to £850,000 for couples who pass their family home to children or grandchildren. In 2020, this will rise to £1million in total for a couple. The tax is charged to the beneficiaries of the deceased’s estate.
The Office of Tax Simplification confirmed it would examine the entire system apart from the 40 per cent rate.
It said this will include the socalled gift allowances that allow savers to pay money to friends or relatives without being subject to inheritance tax.
The Treasury said: ‘Inheritance tax is paid on the money and assets that people pass on to their loved ones and it is right that we look at ways to minimise any burdens to individuals and families. The OTS will publish its findings in due course.’
‘A money-making opportunity’