13th April 2015
The Conservatives have pledged to revamp the UK’s inheritance tax (IHT) regime by introducing a new allowance which would raise the threshold to £1m.
Speaking over the weekend Prime Minister David Cameron urged the individual IHT threshold will be raised from £325,000 to £500,000 when property is included, giving a married couple a shared £1m threshold.
Inheritance tax is currently payable at a rate of 40% on the value of an estate above the £325,000 limit – or £650,000 for a couple. At present a £1m property would be liable for IHT bill of £140,000.
The party said it would bring in the overhaul in 2017. According to reports, it is estimated that some 22,000 families would benefit from the move by 2020. Cameron said the costs would be paid for by a £1bn raid on pension tax relief for people earning more than £150,000.
Tom McPhail, head of pensions research at Hargreaves Lansdown said: “This policy announcement will undoubtedly be popular with the minority of home-owners who stand to benefit from it. Aside from this however, it is likely to distort both the housing market and the long-term savings market. It comes on the back of a series of fundamental changes to the pension system in recent years without any behavioural analysis or assessment of the likely long-term consequences.”