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<p>Inheritance tax makes an important contribution to the health of public finances
and the Government has no plans to abolish it.</p><p> </p><p>The rate of inheritance
tax is normally 40% on the value of an estate above a nil rate band of £325,000. Any
unused nil rate band may be transferred to a surviving spouse or civil partner, increasing
their combined threshold to up to £650,000.</p><p> </p><p>However, the Government
recognises that individuals work hard to build up assets with the aim of passing these
on to their families. Rising house prices have contributed to more families facing
an inheritance tax bill. The Government is addressing this through the phased introduction
of the additional £175,000 residence nil rate band. Any unused residence nil rate
band may also be transferred to a surviving spouse or civil partner.</p><p> </p><p>Taken
together, the combination of the nil rate bands means an individual could pass on
up to £500,000 in 2020-21 and the estate of the remaining spouse or civil partner
could pass on up to £1 million under certain circumstances in 2020-21. Around 96%
of estates are forecast to be able to pass on all their assets without paying any
inheritance tax as a result.</p><p> </p><p>In January 2018, the Chancellor of the
Exchequer commissioned the Office of Tax Simplification to review the tax. The first
report was published in November 2018 and the second report in July 2019. The Government
will consider the recommendations.</p>
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