Raising The £3000 Annual Inheritance Tax Gift Allowance
Raising the current Inheritance tax threshold would certainly make a difference to family life in Britain, particularly at times when families are grieving the death of a loved one, the intrusion of the taxman is least welcome.
However, HMRC appear to have ignored a very simple fix that would yield significant benefit at a lower cost to the state and probably help dissipate a sense of injustice that is growing in relation to Inheritance tax.
The current tax rules permit each person to gift away up to £3,000 a year without incurring any Inheritance tax. Larger gifts which are currently unlimited are called Potentially Exempt Transfers are Inheritance tax free only if the person gifting the asset lives a further seven years.
To suggest that an increase to this allowance is overdue is a vast understatement. It has, been stuck at its current level since 1981. It is an injustice that no action has been taken on this allowance for more than 30 years. Even if the allowance had been allowed to increase with inflation it would stand at around £9,239 today.
Increasing the gift allowance might not satisfy those who want rid of inheritance tax altogether which at the moment seems increasingly unlikely. However, as it will bring greater fairness without unduly widening Britain’s wealth divide.
Despite all of this Inheritance tax easily be avoided with prior planning using an experienced adviser. The savings vastly outweigh the charges we make for our advice.