Jeremy Hunt faces calls to simplify the tax system. Photo: MANDEL NGAN/AFP via Getty Images
Jeremy Hunt has been called on to demand an inheritance tax on pension funds set by one of Britain's most influential economic think tanks.
The Institute for Fiscal Studies (IFS) said the Chancellor could raise between £1 billion and £2 billion over the coming decades by eliminating taxation. free transfer of unspent pension funds.
IFS experts also called on Hunt to abolish incentives for the transfer of agricultural land.
David Sturrock, senior research economist, said: “Inheritance tax is riddled with special exemptions and exemptions that make the tax unfair. Instead of gradually carving out more and more assets from tax, the government should take steps to reduce or eliminate some of the key exemptions in the system.
“Removing the special treatment given to certain shares, limiting business benefits and agricultural assets, and including pension pots within the scope of the tax will make the system fairer and increase income.”
Under current rules, people receiving defined contribution pensions can bequeath any money left after their death without incurring an estate fee.
The think tank said the loophole encourages wealthy people to fund their retire in other ways and accumulate your savings. pension savings to avoid paying tax.
This argument is based on an analysis of inheritance tax relief for certain types of assets after the Chancellor announced in the Budget that such relief would be extended to agricultural land.
It follows repeated reports over the past year that the Treasury is considering scrapping or significantly cutting the tax.
However, after several financial reports, such a policy has not appeared.
The IFS said Mr Hunt could reduce the rate significantly. . inheritance tax or raise money for other expenses by eliminating exemptions and simplifying the system.
Shares of small and medium-sized growth companies listed on the London Stock Exchange's AIM market also receive special treatment if they are held for two years before death.
Removing this exemption would raise £1.6 billion by the end decades. , according to the IFS.
It also highlights that limiting the amount of intestacy support for a family firm or agricultural land to £500,000 per person would raise £1.8 billion by 2029-30.< /p>< p>The complexity of the system means that, although the overall rate is 40 per cent, estates are often taxed much less.
According to the IFS, on average estates worth £10 million are subject to an effective tax rate of 17 per cent, and estates worth £2 million are subject to a higher tax rate of 24 per cent.
Experts say this partly reflects the fact that the richest families can access better tax advice.
The Office of Tax Simplification found a decade ago that there were 88 types of inheritance tax relief, making the system is incredibly difficult for families to understand.
Arun Advani, associate professor at the University of Warwick, said: “Last year's rumors about the abolition of inheritance tax turned out to be wrong. . There have been no major changes to the tax, but instead it appears to be facing a thousand cuts as yet another relaxation has been introduced. The four biggest breaks alone reduce inheritance tax revenue by 38% compared to if they were scrapped.”
Inheritance tax is one of the most disliked forms of taxation in Britain. YouGov polls show that a majority of the population thinks this is unfair. And this despite the fact that last year only 5% of estates suffered from it.
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