Self’s assessment: Inheritance tax

Inheritance tax (IHT) has been with us in one form or another since the introduction of estate duty in 1894. From 1974 there was a tax on lifetime gifts but this was abolished by Nigel Lawson in his 1986 Budget when he renamed capital transfer tax as IHT. It is now as the name suggests primarily a tax on inheritances but lifetime gifts within seven years of death are also charged as are gifts into trust. It raises some £7bn a year – significantly less than the ‘big 3’ of income tax national insurance and VAT but still a meaningful amount.

Despite the fact that only about 4% of estates pay IHT it is widely regarded as an unpopular tax. This may be because many people wrongly expect to pay it but it is also likely...