Old Mutual Wealth has set out proposed changes to the inheritance tax nil-rate band and residence nil-rate band (RNRB)laid out in an open letter to Chancellor Philip Hammond.
Rachael Griffin, tax and financial planning expert at Quilter, said in the letter that there are numerous legacy clauses and exemptions causing “havoc and confusion” for those looking to navigate inheritance tax.
Griffin called for the RNRB to be removed and for the nil rate band to be increased, arguing the residente nil-rate band has made inheritance tax even more complicated than it was before.
She says: “[The nil-rate band] has been £325,000 since 2009. If it had tracked inflation it would stand at £414,000 in 2017, an increase of 27%. The nil-rate band should be increased to £1m updating it and removing the necessity for an overly complex residence nil-rate band.”
She added: “Hitting the right balance of reducing tax liability while ensuring financial sustainability is no easy task. However, what cannot be forgotten is the inheritance tax system is incredibly complex and the addition of the residence nil rate band has added another variable to an already painfully challenging equation.”
There is usually no inheritance tax to pay if the value of an estate is below the £325,000 threshold, or if it is left to a civil partner, spouse, a charity or community amateur sports club. (continues…)
In a response, the Treasury says the current form of the nil-rate band and the residence nil-rate band, which was announced in the Summer Budget in 2015, “strikes the appropriate balance” between benefiting most families and stabilising public finances.
Also, the independent Office of Tax Simplification (OTS) has been told to get rid of the “complicated” residence nil rate band (RNRB) in its review of inheritance tax.
The OTS is reviewing submissions to a consultation into inheritance tax and expects to publish its report in Autumn 2018.
This follows a request from the Chancellor, Philip Hammond, who asked the OTS to determine whether there was an opportunity for simplifying the tax.
Old Mutual Wealth changed its name to Quilter in March and formally listed on the London Stock Exchange in June, marking its separation from former parent Old Mutual.
The business’s subsidiaries will be rebranded to Quilter over a two-year period after the separation.
International Investment’s latest ezine, a special report devoted to the issues surrounding IHT, is available here.
