With the next General Election looming the Prime Minister, David Cameron has stated once more that he would like to increase the Inheritance Tax threshold to £1 million. As the percentage of Estates that pays Inheritance Tax is in single figures this proposal would not affect many estates but those it did affect would have a huge tax saving.
Inheritance Tax is a tax on the value of a person’s estate on death and on certain gifts made by an individual during their lifetime. Each Individual is able to leave a set amount free of Inheritance Tax. Currently the Inheritance Tax threshold is £325,000.00 and tax is charged on the amount over that threshold at a rate of 40%.
Inheritance Tax raises a significant amount of revenue. In 2011/2012 the tax raised £2.8 billion and it is estimated that 4% of Estates paid tax.
Under the current legislation, if Mr X had £1 million (subject to any available exemptions), £270,000 tax would be made payable. If the Inheritance Tax threshold was increased to £1 million then no Inheritance Tax would be payable.
Although In theory if the proposals are implemented some Estates would inevitably benefit from significant tax savings. However, this proposal has been made before and of course there is no guarantee that it will ever become law.
In the 2010 Conservative Party Manifesto there was a pledge to increase the Inheritance Tax threshold to £1 million. However, as the Conservative party did not win an overall majority at the General Election the pledge may never came to fruition.
Readers should be aware that in certain circumstances there are exemptions available for Inheritance Tax. For example, gifts made to a registered Charity are not subject to Inheritance Tax and business assets and agricultural land often qualify for relief from Inheritance Tax.
If your Estate currently exceeds £325,000.00 there are ways to plan for Inheritance Tax and reduce or even extinguish your liability to Inheritance Tax. Don’t wait for possible changes to the law, which may or may not happen, seek advice now.
For further guidance on matters involving inheritance tax please contact our experienced team of Wills, Trusts & Probate solicitors on 0845 050 1958 or fill out the online application form.