Childless Couples Penalised By Unfair Inheritance Tax Rules

Childless couple are being unfairly penalised by Inheritance Tax (IHT) rules in what Family Estate Planning’s director Andy Pulford has called a “glaring inequality”.

Andy said the current rules penalise people who do not have children and are “completely unfair”.

He is urging the Office of Tax Simplification to address the issue as it considers a raft of proposed changes to Britain’s most hated tax.

Andy said: “Homeowners are currently allowed to give £150,000 of the value of their property to children on top of their existing £325,000 IHT allowance under the Residence Nil Rate Band (RNRB) rules introduced in 2017.

“This will rise to £175,000 next year meaning a couple with children can pass on £1 million tax free. However, as you can only make the gift to a direct lineal descendant, people without children will miss out.

“If for whatever reason you don’t have children, whether you’re married, living together or in a civil partnership, you’ll lose a combined £350,000 of tax free IHT allowance.

‘Glaring Inequality’

“This is completely unfair and a glaring inequality – why should somebody who has children benefit more than somebody who doesn’t? Why can’t you leave a share of your property to someone else, like a sister or brother?”

Other significant proposed changes are cutting the time it takes for a gift you make to become IHT free from seven years to five and removing taper relief – the system whereby the tax is levied on a sliding scale.

Andy said he was concerned that some people are going to get caught out by this if the new rules comes into force.

“At the moment the seven year sliding scale eases people into the tax, but if this were scrapped then people could face a potentially unfair situation whereby if they die 4 years and 364 days after making the gift it will be taxed, but just a few hours later it won’t,” he said.

“Also, it remains to be seen if reducing the period to five years will actually reduce the tax collected by the Government or increase it, as some people have already speculated.

“Ultimately the Devil’s in the detail and there’s likely to be some winners and some losers. Whether it’s actually a tax grab remains to be seen.

“Inheritance Tax can be confusing but we can help with all your estate planning needs.”

You can find out more with our guide to mitigating against Inheritance Tax.

Family Estate Planning can advise on all aspects of Inheritance Tax and estate planning. Please email contact@familyestateplanning.co.uk or call Andy on 07984 013533 for an informal chat.