Back in the early summer, Lord Adair Turner, former chairman…
The new Conservative majority government means that many homeowners are hoping that the manifesto promise on Inheritance tax (known as IHT) is going to come to fruition. It is often widely considered that IHT is one of the most unfair taxes and over recent years we have had various promises about reforming it. A recent YouGov poll* found that close to 60% of voters thought IHT was unfair (this was the highest for all the tax polled) – the BBC licence fee and fuel duty came joint second.
Back in 2010, the Conservatives promised to significantly increase the IHT nil-rate band, but due to the state of the nation’s finances back then and the fact that they were in coalition, they were unable to implement any changes. In fact, the IHT nil-rate band has been stuck at £325,000 now for several years and this has meant more and more people paying IHT over the course of the last few years.
In recent times, David Cameron has made his view clear that IHT should only be paid by the richest in society. Currently, the number of people paying this tax is rising, with more and more people being dragged into paying IHT mainly because of rapidly rising house prices.
The Conservative manifesto included a promise to add a transferable family home allowance of £175,000 to the Inheritance Tax (IHT) nil-rate band from 2017. This means a potential allowance of £1million for a couple. It is proposed that the resulting loss of IHT will be funded from further restricting pension tax relief for higher rate tax payers.
Since, at the time of writing, we are still in the early days of this government and haven’t, as yet, had any further announcements on this subject, it’s too soon to know what will happen; but many are hoping that the measures will go ahead. Judging from the YouGov polls it would seem that this would certainly be a very popular move.
This measure, along with the new rules on pension funds allowing capital to be passed on through the generations tax efficiently means that many people could be paying less IHT in the future
* YouGov poll March 2015.
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