Chancellor Philip Hammond’s IHT regime review should look at how current gift rules interact with the wider IHT system and look at simplifying the rules around the residence nil rate band (RNRB), a tax expert has advised.
Killik & Co. head of tax and trustee services Sarah Hollowell said “the current gift exemptions have scope for simplification as the rules can be confusing; particularly when a donor wants to make more than one type of gift to make the best use of all the exemptions available”.
“These have been the same for many years with no inflationary increases,” Hollowell stated.
“Perhaps the biggest complication to the IHT regime is the residence nil rate band (RNRB) which was supposedly brought in to reduce the number of estates assessable to the tax.
“While this is an undoubtedly welcome “uplift” to the amount of an estate that would fall outside the IHT net, the rules surrounding it are extremely complicated, particularly for the average person and the exemption doesn’t apply if the deceased’s property isn’t being left to their direct descendants,” she added.
The latest figures available indicate that less than 5 per cent of estates have to pay inheritance tax.
“Despite this, it seems to be something that a much higher proportion of people worry about. Some could be making gifts and possibly even investment decisions driven by their own views on estate planning that might not be required,” Hollowell said.
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