Inheritance tax should be cut to 10 per cent because soaring property prices since 1980s mean more people are crossing the payment threshold, MPs say
- Inheritance tax was initially designed as a levy on only the very wealthy
- But soaring house prices mean more and more families are affected by the tax
- It is charged at 40 per cent on estates worth more than £650,000 for couples
Inheritance tax would be cut from 40 per cent to 10 per cent under a shake-up put forward by MPs.
But the cross-party group is also suggesting removing tax-free allowances on family homes passed down to children and grandchildren. And a rule that lets gifts made seven years before death go tax free would be scrapped.
Inheritance tax was designed as a levy on only the very wealthy, but triple-digit property inflation since the 1980s has dragged more families into its grasp.
It is currently charged at 40 per cent on estates worth more than the tax-free threshold of £325,000, or £650,000 for couples. But the all-party parliamentary group for inheritance and intergenerational fairness is calling for it to be cut to 10 per cent, and 20 per cent for estates worth more than £2million. The MPs say the changes would make the system fairer and reduce tax avoidance.
Currently anyone can hand over cash tax free during their lifetime, as long as they live for another seven years.
But the group is proposing a maximum £30,000 tax free each year. The report recommends axing the rule where parents can give a further £150,000 if the family home is passed on. Fewer than 5 per cent of deaths result in inheritance tax being paid.
A Treasury spokesman said: ‘Inheritance Tax makes an important contribution to the public finances. We keep the tax system under constant review and will consider the APPG’s findings.’