Inheritance Tax Update

After last week’s Budget announcements David Cameron has confirmed that he would still like to look at increasing the Inheritance Tax threshold.

At present the Inheritance Tax threshold (called the nil rate band) is £325,000 per person.  Since 2007 there has been something termed a transferrable nil rate band for married couples.  This has meant that for married couples there has been the possibility of a nil rate band on the death of the second spouse of £650,000 (depending on what happened on the first spouse’s death).  If the estate exceeds this nil rate band allowance then the amount above this limit is taxed at 40%.

Before the Conservatives came to power they made a pledge that they would raise the nil rate band threshold to £1 million.  This has not materialised however, and David Cameron has suggested that this was down to opposition from the Liberal Democrats.

At a meeting hosted by Saga yesterday David Cameron said that “Inheritance Tax should only really be paid by the rich” and “generally speaking we should be encouraging people to pass things on to their children”.

He has also confirmed that “the ambition is still there ... and it is something we will have to address in our manifesto”.

This is a strong indication that the Conservatives will include a rise in the Inheritance Tax threshold in their 2015 manifesto.  Whether they will again suggest a rise to £1 million, and whether this is something that would be achieved if they came to power again, we will have to wait and see.