The inheritance tax threshold could rise significantly before the general election in May 2015.
Prime Minister David Cameron believes that families should not be made to pay large amounts of tax on homes where they have lived for several years.
He hopes to increase the inheritance tax threshold in the coalition’s final budget before the election. The budget will be announced in March 2015 and could come into effect within a month, as the new tax year begins.
Speaking at an Age UK event in October, Mr Cameron said: “Inheritance tax should only be paid by the very wealthy, and I think you should be able to pass a family home on to your children rather than leave it to the taxman.”
The inheritance tax threshold is currently £325,000 – a figure that is well below the average house price in certain parts of the country. The average price of a property in the South East is currently £338,000, while in London it is now £514,000.
With 40% tax liable on everything beyond the £325,000 threshold, many families could be forced to sell the property in order to pay the bill. The government’s official forecaster has predicted that within four years, one in ten homes will be valued above the inheritance tax threshold.
We shall keep clients informed of developments.
Please contact us for advice on inheritance tax planning. There are a number of options available to people who want to reduce inheritance tax liability and leave as much of their estate to their loved ones as possible.