Asset management company Aegon has welcomed debate on the rules surrounding Inheritance Tax (IHT) following a proposal from the Conservative party to stop IHT on primary residences and to cut stamp duty on shares.
When a person dies, their estate - which comprises all their assets including property and a share of jointly-owned assets - may be subject to IHT. The current nil rate band for IHT is £300,000 and estates worth less than this are not subject to tax. However, rising property prices have pushed many properties over this threshold, leaving individuals to pay tax at a rate of 40%.
The proposal states: “We [the Conservatives] suggest priorities for targeted tax reductions that will encourage a more enterprising UK when the policy allows, including lower corporation tax, the removal of inheritance tax, the reduction of capital gains tax, the abolition of stamp duty on shares and raising the threshold for 40% income tax. The reform of inheritance tax and capital gains tax would have the effect of removing the family home from inheritance tax.”
Aegon’s technical manager, Margaret Jago, said: “In 2002 the number of people with estates over the IHT threshold was around two million. Today, more than four million people are affected so it is easy to see why the Conservatives’ economic competitiveness group, headed by John Redwood, feels this tax is unfair and should be abolished.”
“If the IHT threshold was increased in line with recent house price inflation, it would currently stand at around £450,000. So another possibility would be to raise the current IHT threshold, which would mean more people are exempt from this tax,” she added.
Ms Jago points out that, should the proposal become law, the £4 billion in lost revenues would have to be found elsewhere, and that this would most likely be accomplished through increases in other taxes.
“Aegon welcomes a debate on the future of IHT as this proposal adds even more uncertainty in the market. Individuals should still be looking at carrying out IHT planning under the current rules,” said Ms Jago.
Find out more about inheritance tax