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Inheritance tax (IHT) was targeted by Rishi Sunak yesterday as the Chancellor laid out his “tax day” plans. The Government announced plans to reduce tax difficulties and this will impact businesses and families alike.
On inheritance tax, the Government confirmed: “Today’s update will also cut inheritance tax red tape for more than 200,000 estates every year, dramatically reducing the amount of paperwork many families fill out.
“Over 90 percent of non-tax paying estates each year will no longer have to complete inheritance tax forms when probate or confirmation is required from January 1, 2022.
“None of today’s announcements will have any impact on the Government’s finances or require legislation in the current Finance Bill.”
The changes overall were broadly welcomed as Becky O’Connor, the Head of Pensions and Savings at interactive investor, summarized: “The Government’s ‘Tax Day’ consultations paper proposes a series of measures that overall, make it easier for people to pay tax and harder to avoid it.
“For pension holders and investors, there is little in the document to suggest any swingeing changes to come, but it could just be a case of cans being kicked down the road.
“Changes to the criteria for holiday let owners will cause a headache for some who had properties ‘available to let’, saving tax, despite not letting them out.
“Measures to make the administration of inheritance tax matters on a relative’s estate when they die less onerous, could make this difficult task a little easier for families.
“Big pensions measures were notable by their absence. There were no proposed changes to equalise pensions tax relief for all taxpayers, for example, as had been rumoured.
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“Already planned changes to the Dormant Assets Scheme expansion, which will encompass investment and pensions, will be legislated for in a future Finance Bill.
“There are some technical updates to pension tax rules, forming part of a remedy to 2015 public service pension reforms, which had resulted in some scheme members losing out.
“The Guaranteed Minimum Pension will continue to be indexed for public sector employees who reach state pension age after April 5 this year.
“If the Chancellor is thinking about how to make big reforms to the UK tax system, it doesn’t look like today was the day to do it. Overall, the changes iron out kinks in the existing system and pave the way for future reforms.”
Similar sentiment was shared by Nick Cousins, the CEO at probate specialists, who welcomed the changes.
Nick noted anything that can reduce the administrative burden for those dealing with bereavement is good news, but further action is still needed.
As he explained: “The bereavement process – a big part of which is handling probate and inheritance tax – is a slow and stressful one, made even more challenging by the fact that the person is often grieving while attempting to navigate all administration involved.
“Our Probate Prospects report shows that even legal professionals working in the area agree, with the vast majority saying they feel the process does not work as it should, admitting the time it takes to complete probate is unacceptable.
“On average, probate takes around three months, but for one in 14 people it takes a year or more, and these delays are most often caused by hold ups in administration – whether that’s the discovery process, waiting for institutions to get back with the information needed, or filling in forms.
“This is not just time consuming, but incredibly stressful – in fact, our research shows that 86 percent of people dealing with the bereavement process become stressed, one of five of whom become ‘extremely stressed’.
“Much of our work at the moment is on inheritance forms, so we absolutely welcome these reforms, as they will make a huge difference to so many people. But there is so much more that can be done. We believe that the process can be improved by technology and better access to data.”
As it stands, bereavement services can be provided by local councils across the UK.
These services can be checked on through the Government’s website where a free-to-use tool can provide users with information on what support may be available for them.
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