• March 29, 2024
 The IHT Waiting Game

The IHT Waiting Game

In a conference at the Age UK headquarters last week, David Cameron showed great support towards raising the inheritance tax (IHT) threshold in an attempt to help benefit the typical middle class families.

As it stands, the plan is to raise the threshold in which consumers pay the 40% IHT to a level of £1 million. If this goes ahead, it may even be introduced into the Budget as early as next year. That said, if the Conservatives remain in power, it is likely to be some time after next year’s election before consumers reap the benefit.

Cameron’s enthusiasm for the proposal suggests it could be put into the manifesto in time for the next election. However this will be approached with caution, as George Osborne intends to focus on elimination of the structural budget deficit.

Back in 2007, Osborne had proposed the £1 million threshold, but the pledge was discarded after the 2010 election during the coalition negotiations.

During the convention at Age UK, Cameron stated middle class families are increasingly unable to acquire estates without having to pay 40% tax. He says inheritance tax should only apply to the wealthy. However with the current threshold at £325,000, or £650,000 for couples, surging property prices means many are now falling within the tax bracket.

Cameron explained this thoughts behind the proposal, saying, “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’.”

In fact, the Office for Budget Responsibility estimates the number of estates that will become eligible for IHT will double within the next 5 years, to around 1 in 10 households.

This just highlights the importance of very careful financial planning, and shows having a qualified professional at your side could mean the difference between loved ones gaining what they deserve, or having the taxman take more than necessary.

 

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