A group of MPs has published a report calling for inheritance tax to be abolished in its current form.

What is being proposed?

• Replacing inheritance tax, currently charged at 40 per cent on estates worth more than £325,000 (£650,000 for married couples), with a tax of 10 per cent (20 per cent for estates worth over £2 million)

• Scrapping the majority of exemptions, such as Business Property Relief (BPR) and Agricultural Property Relief (APR).

• Abolishing the uplift for Capital Gains Tax, whereby assets are rebased on death.

• Bringing in a 10 per cent tax on gifts over £30,000.

Why is reform needed?

The report follows calls for inheritance tax to be simplified.

At present, fewer than five per cent of estates pay inheritance tax and there is widespread dislike of the tax among the public. There is a perception that the very rich are able to avoid this tax through the use of exemptions such as BPR and APR, while families whose wealth is mainly tied up in their home cannot.

The Residence Nil Rate Band, the additional allowance that was introduced in 2017, allows individuals to have a higher tax free allowance when they hand on wealth in their home to their direct descendants. However, it is unnecessarily complicated and discriminates against those who do not have children or who do not own residential property.

What's next?

It is likely that there will be a full consultation process before any reforms are implemented, so any changes probably won't take effect for some time. It will however be interesting to see whether any changes are announced in the Budget on March 11.

  • Megan Seabourne is a partner at award-winning law firm VWV, which has offices in Clarendon Road, Watford