BUDGET 2015: Gov to raise inheritance tax threshold
Osborne told the House of Commons that from 2017 there will be a £175,000 tax free household allowance per person while this will sit on top of a £325,000 threshold which will be fixed until 2021.
The Chancellor said: “To pass something on to your children is about the most basic, human and natural aspiration there is. Inheritance tax was designed to be paid by the very rich.
“Yet today there are more families pulled into the inheritance tax net than ever before and the number is set to double over the next five years. It’s not fair and we will act.
“From 2017 we will phase in a new £175,000 allowance for your home when you leave it to your children or grandchildren.
“It sits on top of the existing £325,000 threshold which will be fixed until the end of 2020-21.
“Both allowances can be transferred to your spouse or partner.
“And from today we’ll make sure those who choose to downsize do not lose any of the allowance from the property they used to own.”
Steve Wilkie, managing director of equity release provider Responsible Life, said: “Increasing the inheritance tax threshold has been bandied about for years, but there’s been a lot of bluster and carrot dangling but very little action.
“In the meantime, families have been hit as property prices have risen significantly and the inheritance tax threshold has remained static.
“For most ordinary people, their home makes up a significant portion of their total wealth, so it’s galling for them to see the tax man grab a bigger piece of their inheritance pie as property prices have risen.
He added: “Inheritance tax changes will benefit families in the north more than the south, where average house prices are much lower.
“But a large number of homeowners across the UK will still be better off – and hardworking people will finally see more fruits of their labour passed onto their children and grandchildren, and not into the tax man’s pocket.”
But Zoopla data suggests southerners will see more of a benefit, as earlier the property website calculated that extra 428,011 homes in London will escape the levy compared to 953,498 in the whole of England, Scotland and Wales.
Lawrence Hall, head of communications at Zoopla, said: “Due to rising house prices, the number of families paying death duties would have soared in coming years, so the decision to increase the threshold is a sensible solution to a problem that was bubbling under the surface.
“As with the stamp duty changes, these proposals are a much-needed modernisation of thresholds that would have risked becoming obsolete as property values head northwards.
“Most of us work hard our entire lives so that we can bequeath assets to our children and grandchildren and the increased threshold means fewer families will be stung by the taxman after relatives pass away.”