“The Office of Tax Simplification pointed to inheritance tax as an area ripe for reform in its plans for the year ahead and with the weight of the Chancellor behind it, the OTS has a golden opportunity to simplify this complex area of taxation.
“The inheritance tax system is not straightforward and has a number of legacy clauses and exemptions that the government could seek to reform. One of the best examples of over-complication in death taxes is the residence nil rate band (RNRB), which is incredibly complicated and causes a lot of confusion. Our research revealed that 70 percent of people have no idea how the RNRB works. An easier method to achieve the same goal would be to simply raise the standard nil rate band amount to £1 million.
“The overall policy direction has shifted in recent years towards allowing people to pass on more of their wealth on death, however many people would like to help their families while they are still alive. The annual gifting allowance is easily understood and has remained at just £3,000 since 1981. If it had increased in line with inflation it would now be worth £10,000. Increasing longevity means that men aged 65 will live to 87 and women until 89 so their children will often have to wait till their 50s and 60s before they receive the money which is not when they need help the most.
“For individuals and families that are thinking about estate planning, it is important for them to keep an eye on whether inheritance tax rules do change and make sure they take advice from a professional financial planner to ensure they are making the right arrangements in order to pass on assets to their family tax efficiently.
“An HMRC report published alongside the previous budget shows very few people properly understand the reliefs and exemption available, so it is crucial to take professional advice. A professional financial planner can help families and individuals ensure they are passing on assets to their family tax efficiently.”