Calls Raised to Abolish Inheritance Tax
April 7, 2014 Taxation in UK
LONDON – Inheritance Tax in the UK is becoming increasingly unpopular, and may be abolished soon.
Late last week the Institute of Fiscal Studies (IFS), an independent UK based think tank, released a new report showing that the current inheritance tax is inefficient, and should be dropped entirely.
According to the IFS, in the 2014 year inheritance tax was applied to less than 4.5 percent of all estates in the country, and the collection of the tax only brought in approximately GBP 3.5 billion, approximately 0.6 percent of all tax revenues in 2014.
Inheritance tax is currently applied at a rate of 40 percent on estates valued above the threshold of GBP325 000, with the only exemptions available for gifts to spouses, donations to charities, and transfers of agricultural land and some business assets.
The authors of the report noted that the government is currently looking into the feasibility of raising this threshold to GBP 1 million, a move which would reduce revenues from the tax by 70 percent to only GBP 0.8 billion per year.
Alternatively, instead of raising the threshold, the IFS suggested that the tax could be removed entirely, which would “ … simplify the tax system and get rid of an ineffective and unpopular tax which can be criticized in any case as a source of double taxation.”
Photo by: Emmett Tullos