Inheritance Tax must be one of the most reviled taxes in the Treasury’s arsenal but there have been few moves to change it in recent years. But why is that, and why is the so-called “death Duty” becoming such a thorny issue?
One of the biggest issues has been house prices. Since the 1980’s, when the idea of owning your own home really took hold in Britain, house prices have risen exponentially. A house bought at £30-40,000 in the 1970’s could now be worth £300-400,000 and inheritance tax thresholds have not risen to match.
“A person with a relatively modest day-to-day income could be sitting on vast bricks-and-mortar assets,” explains our Paul Dodsworth. “When they pass away, these assets suddenly become taxable. The question is, is this fair on their offspring who have to pay this bill?”
There are many calls to raise the threshold with this in mind but such calls have been resisted.
“The trouble the government currently has is their promise to slash the government’s deficit and they can’t do that if they hobble one of their main sources of income. Sadly for all of us, Inheritance Tax is a big slice of their tax receipts.”
Raising the Inheritance Tax threshold to £1m, as some commentators have suggested, would cost the treasury £5.8bn a year – a loss that the government are, naturally, wary of.
So inheritance tax seems as though it’s here to stay. That said, there are plenty of ways of minimising your risk of passing a tax bill onto your loved ones. If you’d like to discuss your options, call one of our advisers on 01625 540033