Chancellor Rishi Sunak has put forward plans to make the administrative burden associated with inheritance tax lighter.
As part of a March 23 unveiling of more than 30 different publications relating to tidying up the UK's tax system, the Treasury said it had recognised the need to simplify and smooth out the administration of IHT.
In the update, Jesse Norman, financial secretary to the Treasury, said it was "cutting IHT red tape for more than 200,000 estates every year, dramatically reducing the amount of paperwork many families fill out."
This means that more than 90 per cent of non-taxpaying estates each year will no longer have to complete IHT forms when probate or confirmation is required from 1 January 2022.
Reporting regulations will also be updated for estates where the deceased was never domiciled in the UK but owned indirect interests in UK residential property.
And that was pretty much it. No reforms of the current allowances, no updates, no bringing reliefs into the 21st century.
This was a great disappointment to tax professionals, especially after a series of reports over the past few years, many of which called for a more radical rethink of IHT in the UK, especially as some of the reliefs and thresholds were set in the 1980s.
Rachael Griffin, tax and financial planning specialist for Quilter, says: "This is a step forward towards greater simplicity, but leaves the system largely unchanged.
"We are still a long way from seeing any fundamental changes to the IHT system as recommended by the Office for Tax Simplification and the APPG on Inheritance & Intergenerational Fairness.”
In reports published in November 2018 and July 2019, the OTS set out its proposals for reforming IHT.
The first report concentrated on reducing the paperwork and heavy administration burden associated with IHT. The second report focused on updating certain reliefs and exemptions.
The report by the all-party parliamentary group, issued in January 2020, favoured radical reform and abolition of many of the current IHT reliefs.
While tax day has not ushered in significant reforms and recommendations - rather a 'tidying up' of the IHT legislation and administration - commentators have expressed hope that a proper overhaul of IHT may yet be on the cards.
Change is overdue
Changes to the IHT nil-rate band were effectively ruled out earlier this month when it was frozen at £325,000 per person until 2026. But there was still the possibility of other proposals, commentators claim.
Edward Grant, director responsible for professional development at St James's Place, said IHT is "desperately" in need of an update.
He points out that had the lifetime limit on gifting of £3,000 per tax year been updated in line with inflation since its creation back in 1981, the limit would now be £11,900.
Unsurprisingly, he is not alone in wanting IHT thresholds to be raised.
