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IHT exemptions in line for the chop as Budget nears

Inheritance tax (IHT) gifting rules could be dramatically simplified in the Budget, according to financial advice firm, NFU Mutual. Four separate tax gift exemptions formed part of the original IHT rulebook in 1986, three of which have never been increased and could soon be scrapped and replaced with a single, larger annual exemption.

The annual exemption of £3,000, marriage gifts of up to £5,000, individual gifts below £250 and rules for gifts out of normal expenditure have all been scrutinised by the Office of Tax Simplification as part of its review of IHT which is due to be published before the Budget.

Sean McCann, Chartered financial planner at NFU Mutual, commented: “Inheritance tax is a fiendishly complicated tax, feared by many and understood by few. The rules on gifting have remained largely untouched for over 30 years.

“Personal finances have moved on a great deal in the last 32 years and it’s about time the limits and exemptions matched the needs of 21st century families’’

“It’s true that you can’t add simplicity, you can only remove complexity, so a sensible approach would be to replace all the existing exemptions with one single annual exemption of at least £10,000 which would increase in line with inflation.  

“Rather than a radical overhaul of inheritance tax in the Budget, we’re likely to see some simple changes that will help people pass on more of their wealth without the fear of triggering a tax charge. A healthier £10,000 annual exemption along with simpler, clearer set of rules would ease the burden on families”.

Inheritance tax receipts hit £2.4bn in the first five months of the tax year while receipts for the 2017-18 tax year hit a record £5.2bn.

 

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