Rishi Sunak suggests he would cut inheritance tax rate as prime minister | Personal finance | Finance
The former chancellor was campaigning in Cardiff when he was asked if he would scrap the levy, during an election campaign. He said removing the tax altogether was not an option, but he hinted that he could reduce the tax rate.
He said, “I am someone who believes in supporting aspiration.
“I think that’s a Conservative value that many of us in this room will cherish and inheritance tax is one way to do that.
“So, over time, is this something we should be looking at? Of course we should, because people who work hard should be rewarded for it.
“If they want to build something and leave it to their families, that’s an entirely conservative instinct and a government I’m privileged to lead would really want to support that instinct.”
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“That’s what a Conservative prime minister should do.”
There have been previous calls to reduce the unpopular tax.
Phil Hall, head of public affairs and public policy at AAT Accounting Group, said: “AAT has long recommended that the overall IHT rate be reduced from 40% to 20%.
“By halving the very high headline rate, the incentives to avoid or evade will be removed.
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Married couples and civil partners have some leeway, as they can pass assets to each other without IHT and inherit each other’s allowances.
Unfortunately, unmarried couples who cannot do this, even if they have been living together for years or decades.
When a spouse or civil partner dies, their partner can inherit their zero rate threshold of £325,000, as well as a main residence allowance of £175,000.
The allowance applies when people pass on their principal residence to direct descendants such as children and grandchildren.
This represents a potential IHT allowance of £500,000, allowing married couples and civil partners to pass on a potential £1million of wealth to close family.
People also have the option of donating their property if they move house, avoiding tax for as long as they live for another seven years.
Gifts given during the three years preceding the death are taxed at 40%.
Anything given three to seven years before death is then taxed on a sliding scale known as taper relief.
The rate drops every two years, with the tax rate increasing to 32%, 24%, 16% and 8%.