…This is the conclusion of the report published last month called “The Tax Detox” issued by the self described “left wing” Fabian Society.
It reports that in surveys that it has carried out that contrary to popular belief public opinion would be in favour of abolishing inheritance tax and in their opinion is that it is “too toxic” to save.
However, whilst on the face of it these views might be welcomed by many, the Society recommends that inheritance tax is replaced by a form of income tax on legacies and bequests. In other words, they are suggesting that beneficiaries should pay income tax on the value that they receive through Wills or as a result of an intestacy at the beneficiary’s marginal income tax rate.
Therefore, whether any tax was paid on the value left on death would depend not upon the value of the estate but on the income of the beneficiary. Therefore, in some cases where at present no inheritance tax would be paid at all, income tax might be paid at 20%, 40% or even 45% depending upon the marginal rate of income tax paid by the individual beneficiaries.
Therefore whilst on the face of it these proposals might be welcomed by many, the detail may prove to be less palatable, with many beneficiaries effectively paying much more tax than they would under the present system.
The best way to avoid unnecessary inheritance tax charges arising is to ensure that planning takes place over a period of time. One part of that planning should be a well drafted and regularly updated Will.
Ian Newcombe is a partner in the Exeter office of Stephens Scown’s private client team. If you would like to contact Ian then please do so on 01392 210700 or email firstname.lastname@example.org.