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A tax expert has put forward major plans to simplify the inheritance tax system which could lift thousands of families out of paying the 40 percent tax.
Wealth manager Mohammad Uz-Zaman, from ADL Estate Planning, said the threshold for paying the tax should be more than tripled from the current £325,000 to £1million, with the residential nil rate band scrapped.
This would mean married couples and those in a civil partnership would effectively get a £2million nil rate band applied to their estate when the second partner dies.
Mr Uz-Zaman said scrapping the residential nil rate band would make the system simpler and more fair.
He told Express.co.uk: “The residential nil rate band has several problems, for instance the allowance cannot be set against gifts made in the last seven years of one’s lifetime which is the case with the standard nil rate band, it also begins to taper when one’s estate reaches £2million.
“Furthermore, only lineal descendants can benefit. These issues add unnecessary layers of complications.”
He also put forward a proposal to improve the tax system for beneficiaries of an estate who come from a disadvantaged background.
He said: “Many families are asset rich and cash poor. A radical proposal would be to look at the beneficiaries of the family and should they come from otherwise disadvantaged backgrounds or have serious personal problems that could be mitigated with paid expert support services, then their share of the inheritance could be received gross to help them with those issues.
“Rather than entrusting certain vulnerable beneficiaries entirely with the monies, the portion that would’ve been deducted for inheritance tax could be settled into a new statutory type of trust administered by the Court of Protection.”
He said this support could be offered to beneficiaries with mental health problems, those who require expensive medical treatment, and those who are carers.
He said beneficiaries who want to become enterpreneurs or those with an established business could also benefit from the additional capital through such a scheme.
He said: “The Government already provides inheritance tax exemption to those who invest in smaller unlisted trading businesses.
“This is essentially the same thing, except funding is happening during probate via a legacy often via a family member.”
There were previous reports the Government is considering changing inheritance tax or even scrapping the policy altogether in the upcoming Spring Budget.
Mr Uz-Zaman said he believes the Chancellor is unlikely to announce plans to scrap inheritance tax altogether in the policy statement on March 6.
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