Cameron, who was answering questions at Age UK’s London office yesterday, said inheritance tax was a tax that should only be paid by the very wealthy.
“I think you should be able to pass a family home on to your children rather than leave it to the taxman”, he was widely reported as saying, adding that he would try and “shoehorn” the measure into George Osborne’s next Budget.
“I’ve got my work cut out on this one. But he is keen on it too”, Cameron said.
Inheritance tax currently stands at 40% on estates worth more than £325,000, or £650,000 for couples.
Although Osborne did put forward a proposal in 2007 at the conservative party conference to raise the inheritance tax threshold to £1m (£2m for couples), it was dropped after the 2010 general election in the coalition negotiations.
Neil Chadwick, technical manager at RL360°, said it had been made very clear in previous budgets that the Nil Rate Band would not increase for many years to come, the reason being that IHT receipts were required to fund other government expenditure.
“Many UK residents use onshore/offshore products for succession planning and to mitigate against IHT. However, this usually involves the investor having to give up some or all of the access to the product going forward.
He added that increasing the amount at which UK IHT becomes payable will allow investors more flexibility.
“Therefore, if they do manage to increase the NRB, I think it is good news for investors and product providers alike. However, we still have a UK election to throw into the mix and we all know what can happen at emergency budgets should a different political party get elected”, he said.
Wealth transfer strategies
Brendan Harper, head of technical services at Friends Provident International, also welcomed any proposed increase in the nil rate band.
“Increasing property prices, together with a near seven-year freeze on increases in the nil rate band means that more estates are coming within the IHT net. The family home is commonly a person’s most valuable asset, and can use up the nil rate band on its own. It is important, therefore, that wealth transfer strategies are put in place in respect of other assets within the estate.”
Meanwhile, Gordon Andrews, technical marketing manager, Old Mutual Wealth, also highlighted financial planning opportunities.
“This could be great news for anyone whose house is likely to be valued above the nil rate IHT threshold. Potentially, if clients have a greater nil rate band to utilise, this could create planning opportunities.
“However, the financial planning process will continue to focus on creating certainty in areas such as estate and IHT planning rather than relying on political promises. Other financial planning areas outside of IHT planning will also continue to be important, such as managing the client’s investments to help them reach their financial goals”, he said.
To read more about how inheritance tax paid to the UK Government jumped by nearly 10% in the last year, as the amount levied from estates reached £3.4bn, click here.
