Inheritance Tax regime 'needs updating for modern lifestyles'
The much-criticised Inheritance Tax regime needs radically updating, if it is not going to be scrapped by future chancellors, tax experts at national audit, tax, advisory and risk firm Crowe are warning.
Richard Bull, private client partner in Crowe’s Oldbury office, points out that the wide range of differing family circumstances in the UK are not taken into account by current IHT law.
IHT affects single, divorced, gay and/or childless individuals differently. IHT allowances can only be shared between married couples, and the rules provide only for passing on estates to direct descendants
Mr Bull said: “The social changes over the last few decades mean the UK’s IHT regime largely reflects the values of previous generations, despite recently progressions in society.
“IHT is more likely to benefit those in marriages or civil partnerships as it hasn’t kept up with the modern phenomenon of people living as common law partners or those who cohabit with a child or children from a previous relationship.
"Unless properly advised, this could cause a nasty financial shock for families because they do not have the right piece of paper to receive the appropriate tax relief and they even may need to sell assets in order to raise funds to pay the potential liability.
“For example, even though a cohabiting partner may have performed the role of parent for many years, unless formally adopted, only the legal parent’s estate will be able to utilise all of the available allowances.
“The UK’s IHT regime currently contains a number of very generous exemptions that allow families to defer and also mitigate the tax payable when wealth passes down the direct bloodline, yet, those in ‘non-traditional’ families could face difficult financial and personal decisions following the death of a loved one.”
