Government to cut red tape on IHT and tax payments

On UK ‘Tax Day’ wider tax reform has been averted – for now.

The government wants to cut red tape around inheritance tax (IHT) and make it easier to pay income tax, according to Treasury plans unveiled today.

The IHT changes will help around 200,000 estates a year by cutting the paperwork families have to fill out.

More than 90% of non-taxpaying estates each year will no longer have to complete IHT forms when probate or confirmation is required, from 1 January 2022.

The government also wants to “make tax more straightforward to pay and harder to get wrong, improve people’s experience of the tax system, and build and maintain trust between HMRC and taxpayers”.

This will include improving the income tax system for the self-employed. Other plans include cracking down on unpaid tax on offshore assets.

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A Treasury document said it wants to “ensure taxpayers comply with their UK tax obligations regardless of where their income or gains are made”.

The plans are laid out in a series of consultations published by the Treasury today, following the Budget on 3 March.

The Treasury has also dropped earlier ideas to reform tax on trusts.

It has also avoided making increases to levies such as capital gains tax, as many feared.

Worries had been building that chancellor Rishi Sunak would unveil tough new tax measures to help repay the country’s £284 billion bill for Covid-19 support.

In the Budget, the chancellor froze the amount an individual can earn before paying tax until 2026.

But he left any serious updates on tax policy until today, not wanting to overwhelm by publishing too much information on Budget day itself.

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Financial Secretary to the Treasury Jesse Norman said: “We are making these announcements in order to increase the transparency, discipline and accessibility of tax policymaking.

“These measures will help us to upgrade and digitise the UK tax system, tackle tax avoidance and fraud, among other things.”