Inheritance tax could be axed – Javid

SAJID Javid last night revealed he is considering the abolition of inheritance tax.

The Chancellor said many families believe children should be able to inherit all their parents’ wealth without paying the levy.

He said scrapping it ‘was on his mind’ for a budget he hopes to deliver before the end of the year.

Inheritance tax was designed as a levy on the very wealthy, but triple- digit property inflation since the 1980s has dragged more families into its net.

Mr Javid said there was a ‘real issue’ with taxing people when they earn money and then again on death.

asked during a fringe event at the Conservative Party conference whether he would consider scrapping IHT, he replied: ‘First of all we’ve already made some sensible reforms in that tax.

‘But I hear what you’re saying – you’re not the only one – and I shouldn’t say too much now but I understand the arguments against that tax.

‘ You pay taxes already through work or through investments and your capital gains in other taxes – there is a real issue with then asking them to pay taxes all over again. It’s something that’s on my mind.’

an official review earlier this year recommended the confusing rules around leaving cash and property to loved ones should be overhauled.

The report by the Office of Tax Simplification, an independent adviser to the Treasury, found inheritance tax remains ‘unpopular and raises strong emotions’ often because it is ‘poorly understood, counter-intuitive, and requires substantial record-keeping’.

High property prices, longer

‘I understand the arguments’

life expectancies and fears over social care costs mean the tax has become a contentious political issue.

The OTS launched its review after complaints that vague rules on inheritance tax were being exploited by those with access to expensive financial planners.

It is charged at 40 per cent on estates worth more than the tax-free threshold of £325,000, or £650,000 for couples.

The OTS recommended a series of measures to make the tax simpler. It found that one of the biggest areas of confusion was around gifts made during a donor’s lifetime.

Currently gifts of money, property or possessions made in the seven years before death may be liable to inheritance tax. It proposed that the threshold is cut to five years.

Individuals are also allowed to make a number of gifts each year free of tax, regardless of how soon afterwards they die.

But the OTS report found the rules around this were too complex and it recommended simplification.

It suggested replacing the annual £3,000 gift exemption and ‘marriage exemptions’ – wedding or civil ceremony gifts worth up to £5,000 (£10,000 per couple) – with an overall personal gifts allowance.

On top of the normal allowances, there is an extra taxfree allowance for homes passed to direct descendants.

This currently stands at £150,000 (£300,000) and will increase to £175,000 (£350,000) by april next year.

The rise means parents will be able to pass on an estate, including their main home, worth a total of £1million to their children tax-free.