The Office of Tax Simplification has published the first report of its Inheritance Tax review. Highlights include:
• OTS changes would prevent 250,000 families from form filling
• 13% of people spend more than 100 hours dealing with inheritance tax
Laura Suter, personal finance analyst at investment platform AJ Bell, comments
“The Office of Tax Simplification has unveiled plans to stop the unnecessary form filling and stress a large proportion of families have to undergo when a loved one dies. It is ridiculous that ten times the number of people fill out the form associated with inheritance tax than actually pay it.
“A simple online system would mean that up to 250,000 people each year could avoid the stressful process and instead find out instantly online whether they need to complete the longer form filling. This is clearly needed as the report shows that 13% of people spend more than 100 hours on the administrative rigmarole associated with inheritance tax, while 90% of people spent 10 hours or more.
“The OTS recognises that it may take time for a digital system to be introduced and in the meantime has urged HMRC to make it easier for families to go through the inheritance tax process, providing more help and guidance and an online tax calculator.
“The report highlights that the wealthiest families are paying less tax than the middle class, with estates worth £10m or more paying an effective 10% tax rate, compared to a 20% tax for those with smaller estates of £2m to £3m. This is undoubtedly down to the fact that the wealthiest families get professional advice to set up trusts and make full use of the allowances, while those with smaller estates do not.
“This report is the product of 10 months of work by the Office of Tax Simplification into how to fix inheritance tax. The second report from the group is likely to get more into the reliefs and changes to the current gifting rules. In the final report we would hope to see pensions removed from inheritance tax entirely, rather than relying on arcane HMRC rules that currently force most providers to exercise discretion over how pension death benefits are paid out.”
