IHT reform may (or may not) be on the cards

In August this year, the Institute for Public Policy Research (IPPR) published a report recommending a cut in IHT for some families, with a higher rate tax at the top end of estate values.

The report suggested a banding system that would keep the nil rate band but bring in a similar system to income tax, with a base rate of 22% and higher bands of 40% and 50%. This would mean 87% of estates would pay less IHT, but the new system would still raise an extra £147 million.

The IPPR wants to the extra tax raised to be spent on the Child Trust Fund, a recent initiative that currently invests £250 for all children at birth and an additional £250 for those from low-income backgrounds, in accounts for children born from September 2002 onwards.

Invested over 18 years, the new funds could provide an extra 662 for children from the poorest third of families and 331 for the rest, says the IPPR.

The government response to the IPPR document was simply to say that all taxes were constantly under review, but IHT was not the focus of any special review.