Earlier this month an All Party Parliamentary Group (APPG) encouraged the Government to consider making significant reforms to Inheritance Tax in order to reduce the burden for increasing numbers of middle class families being dragged into the Inheritance Tax paying threshold. The proposals suggested that the current 40% should be reduced to a flat rate of 10%, with Estates worth over £2m paying the 20% rate.
The APPG also recommended that Inheritance Tax relief for gifts made during life under the “seven-year rule” be scrapped, with all wealth transfers, made both on life and on death being taxed as a flat 10%, instead of the seven-year rule which allows gifts of £3,000 each year and writes off far larger amounts for the donor who lives longer than seven years. A £30,000 annual allowance was proposed by the Group. It also means that if parents in the South East wanted to gift to their children average sized deposits, they could face a significant tax bill for their good deed, if the new Inheritance Tax system is adopted. First time buyers are the life blood of the property market and the bank of Mum and Dad is now a major player in the UK lending market. As with most proposed changes, there may be far reaching implications which may not necessarily have been considered and of course at present, this is only a proposal. For those who are considering assisting their children onto the property market, now may be the time to do it before the proposals potentially become a reality.
For further information please contact Edward Walter, Partner at Buss Murton Law LLP on T: 01892 502 320 or E: ewalter@bussmurton.co.uk
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