The prime minister David Cameron has brought inheritance tax back into the spotlight with his promise that only the “very wealthy” would pay inheritance tax in the future.
Speaking yesterday at the Age UK headquarters in London, Cameron voiced his support for raising the threshold at which inheritance tax is paid.
He wants to ease the burden of inheritance tax on individuals with estates which currently suffer the tax on death but who do not consider themselves “in any way the mega-rich”. I’m sure quite a few of us can identify with that.
The Tories originally revealed plans to raise the inheritance tax nil rate band to £1m, or £2m for married couples and civil partners, all the way back in 2007 at their party conference.
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Since April 2009, the nil rate band has remained frozen at £325,000, or £650,000 for couples, which results in many estates being subject to some inheritance tax once property values and other assets are taken into account.
The pledge to raise the threshold to £1m was dropped ahead of the 2010 general election because it was seen as inappropriate during times of austerity.
It could be argued that it remains inappropriate to raise the threshold when the public sector face pay caps and many state benefits are frozen.
In the GU6 postcode area, the average property price over the last three months has been approximately £314,862. Once other investment assets are taken into account, it is easy to see how the nil rate band can be exceeded and beneficiaries are charged inheritance tax.
The full transcript of what David Cameron said about inheritance tax aspirations, as reported in the Guardian, is as follows:
“To me inheritance tax is a tax that should be paid by the very wealthy. I think you should be able to pass a family home on to your children rather than leave it to the taxman.
“I would like to see that go further because I think even at £650,000, particularly in some parts of the country, you see someone who has worked hard, they have put money into their house, they have done it up to improve it and they want to leave it to their children and they don’t feel that they are in any way the mega-rich, and they feel: ‘I should be able to do that without having 40% of it knocked off’.
“So I do still have ambitions to do that, but even though I’m the first lord of the Treasury, there is somebody called the second lord of the Treasury – that’s the Chancellor of the Exchequer, so I have got to try and shoehorn these things into his budget.
“He is a pretty co-operative chap, but I’ve got my work cut out on this one. But he is keen on it too.”
We look forward to the Autumn Statement on 3rd December 2014 for any hint of changes to inheritance tax thresholds in the future.
In the meantime, it is still important to consider your inheritance tax planning, particularly if you have strong views on how much you will be leaving to your children and how much they will be paying to HM Treasury when you die.
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