David Cameron’s announcement that the Conservatives would increase the inheritance tax threshold to £1million will see 9 million properties escape paying IHT, according to research by Hargreaves Lansdown.
Inheritance tax is the tax charges on the transfer of assets, which can be during a lifetime, but is usually transferred on death.
The current band for IHT is £300,000 - due to rise to £312,000 for 2008/9, £325,000 the year after and up to £350,000 for 1210/11 - the excess over the threshold is taxed at 40%.
This means that if the Tories were to be elected and push ahead with the £1million band, not only would millions of properties escape IHT, but estates worth over £1million would also save – to the tune of £280,000.
“Inheritance tax is an emotive issue for people. They begrudge a system where they pay tax on the income, savings and investments and then on their estates on death,” said Danny Cox, Head of Financial Practitioners at Hargreaves Lansdown.
“Our experience is that people want to pass their wealth onto their children and grandchildren to make sure that they are provided for. This is particularly important with the rise in property prices”
But, warns Mr Cox, the Tories pledge should not stop people estate planning, “the starting point with any IHT and estate planning is updating your Will,” he said.
“You should also not forget life assurance policies and pensions, which, if not set up correctly, can add to a tax problem”
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