A thinktank has called for inheritance tax to be abolished, as part of a set of proposals for major reform to the UK tax system.

The Institute for Public Policy Research published its 10-part plan for economic reform, which includes replacing the system of inheritance tax with a ‘lifetime gifts tax'.

This new tax would be levied on the recipient of all gifts received throughout a person's life, above a proposed lifetime allowance of £125,000.

All further gifts above this threshold would be classed as income for that financial year and taxed at income tax rates.

The report also recommended replacing the system of rates and allowances for employee national insurance contributions and income tax with a single rate on all forms of income.

Additionally, it would abolish marginal tax bands in favour of a formula-based system where the rate would rise according to each taxpayer's level of income.

Sean McCann, chartered financial planner at NFU Mutual, said:

"Changes to inheritance tax are long overdue, it's a fiendishly complex and deeply unpopular tax. It's clear that we need a much simpler set of rules that are easier to understand.

"Replacing the current system - where tax is levied on what we leave behind, with a tax on the recipient would be easier to understand and administer."

Get in touch to discuss your current tax liability.

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