How will the election outcome affect Inheritance Tax for you?
Inheritance tax (IHT) is back on the agenda after George Osbourne pledged that an incoming Conservative Government would raise the threshold for married couples to £1 million.
UKIP want to go one step further and scrap IHT altogether. With a coalition government of the left or right looking like the likeliest outcome, there is a significant chance that changes to the tax will happen. But how would this really affect you and your family?
As wills & probate specialists operating in North London, Kent and Berkshire it’s fair to say that a large number of our clients will be affected by this change, thanks primarily to the South East’s high property prices.
As things stand, even a modest family home in Crouch End costs well above the £1 million threshold.
Leaving the politics to one side this will either good or bad news depending on whether you own a property.
The IFS has made it clear that any extra relief on IHT will drive up the price of housing further in the capital:
"Anything... which increases the tax privilege associated with an asset like housing will drive the price up in the long run."
So terrible news if you are hoping to get on the local property ladder; great news if you already are; brilliant if your parents’ have done it for you already.
But let’s look at the actual detail. If we take a family home valued at £1.2 million the IHT liability on that as things stand would be £220,000. If the IHT threshold is raised to £1 million, then the liability would be reduced to just £80,000, which is a sizeable reduction.
However, it is fairly debateable how much this really matters. There are a large number of options already available to families with such large assets, so anyone who is genuinely concerned about IHT already has recourse to a number of solutions.
A FLIT Felxible Life Interwst trust – – is one example of how a bit of simple planning can place testator in much stronger position from the point of view of inheritance tax planning.