Think tank calls for inheritance tax (IHT) to be abolished and replaced with a lifetime receipts tax with lower rates and fewer exemptions, which should be levied on recipients, with a tax-free allowance to encourage broadly shared inheritances.
A Resolution Foundation report published on 8 May 2018 outlines a proposal for government to abolish inheritance tax and replace it with a new 20 per cent tax on all gifts or inheritances throughout a person’s life up to £500,000, and then at 30 per cent above that. The first the first £125,000 would be kept free of inheritance tax.
According to the report, any money raised would fund a £10,000 ‘citizen’s inheritance’ – an asset endowment to all young adults who entered the labour market during the financial crisis and since – to help 25-year-olds get on the property ladder, pay for education, invest in pensions and set up businesses.
The think-tank prepared the report for its Intergenerational Commission which has been working on the issue for two years.
It also proposed creating a new property tax to replace council tax, and making working pensioners pay National Insurance to pump £2.3 billion into the NHS.
Chaired by David Willetts, the former Conservative universities minister, the Intergenerational Commission panel also included the TUC secretary general Frances O’Grady and the CBI director general Carolyn Fairbairn.
Mr Willetts says: “Many people no longer believe that Britain is delivering on its obligations to young and old.
“But our Commission shows how Britain can rise to this challenge.
“From an NHS levy to put healthcare on a firmer financial footing, to building more homes and a Citizen’s Inheritance to boost young people’s career and housing aspirations, our report shows how a new contract between generations can build a better and more unified Britain.”
Despite the calls to abolish IHT, it is still a tax which must be considered and can be mitigated through careful planning. However, due to complicated tax rules, many families could possibly be inheriting less than they are entitled to.
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