We all recall the fuss started by George Osborne in 2007 over the future of Inheritance Tax when he suggested to the Conservative party conference that an incoming Conservative government would increase the Inheritance Tax nil rate band threshold to £1million per person. The Labour government, stunned by the popular reaction to the announcement, reacted swiftly. In October of that year Alistair Darling announced that the nil rate band, although it would not be significantly increased, would become transferrable between spouses and civil partners. This was not the great giveaway everybody thought it was because, with proper will planning, it had always been possible to achieve this.
During the election campaign, further excitement was generated when it was suggested that an incoming Tory government would make their £1million nil rate band transferrable as well. This would effectively have removed almost the entire UK population from the Inheritance Tax net at one fell swoop. Sadly, it was not to be. It has been stated that any plans to make significant increases to the Inheritance Tax nil rate band threshold are very much on the back burner. It is highly unlikely that we will see them revived for a number of years. Indeed, the nil rate band threshold has been frozen at £325,000 since 6 April 2009 and is not due to increase until 2015.
So, all the sound and fury of 2007 did indeed signify nothing. Inheritance Tax is still very much with us and still represents a significant threat to family wealth. Inheritance Tax will be still be levied at 40% on the value of an individual’s estate in excess of the available nil rate band even if that wealth has already been subjected to Income Tax or Capital Gains Tax when it was acquired.
The good news is that with sensible planning both during lifetime and through Wills a family’s exposure to Inheritance Tax can be significantly reduced and possibly even removed altogether. We have considerable expertise and experience in helping our clients mitigate the Inheritance Tax threat. Clearly, that threat has not gone away so contact us to discuss how we can help you plan for the future.