Reform of UK Inheritance Tax on the Cards?
(6/9/2004)
A think tank closely associated with the UK government says that inheritance tax should be reformed - with an increased 50% top rate
London-based The Institute for Public Policy Research has called for reform of inheritance tax. The IPPR said a banding system similar to income tax, with rates from 22 to 50 per cent, would be the easiest way to make the system fairer. The vast majority of estates would pay less tax, only the wealthiest would pay more, and extra revenue would go to poorer families via the Child Trust Fund, a government pledge to give all children born after 2002 a trust fund, to mature when they are 18.
The left-of-centre think tank`s proposal has already been attacked by the Conservatives and there will be some doubts about the merits of beefing up the Child Trust Fund. Families drawn into inheritance tax by increased house prices are likely to welcome the idea of a reduced rate. But the IPPR does not recommend an increase in the nil rate band, arguing that the poorest IHT payers are 2still far from poor`.
An increasing proportion of IHT payers are now caught by the large rises in property prices in the UK over the last decade or so. Many people now find themselves technically `rich` due solely to property prices. A freeze tin the zero rate band effectively catches thousands more people in the IHT trap than ever before. The Labour government has not said whether it will adopt the IPPR?s recommendations, but the think tank has a track record of floating ideas that later become policy.
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