Chancellor George Osborne introduced reforms of the inheritance tax regime in the 2014 Autumn Statement, but not in the way many people had hoped.
The threshold at which inheritance tax (IHT) becomes payable on estates, at a rate of 40 per cent, has been pegged at £325,000 since 2009.
It has been estimated that if IHT thresholds had risen at an average of 5.4 per cent a year – which it did in more than two decades from 1986 – it would now stand at around £420,000.
Mr Osborne made no adjustment to the threshold in the Autumn Statement on December but he did extend an existing IHT exemption for members of the armed forces whose death is caused or hastened by injury while on active service to members of the emergency services and humanitarian aid workers responding to emergency circumstances. It will have effect for deaths on or after 19 March 2014.
Another existing IHT exemption – which excludes the value of medals and other decorations awarded for valour or gallantry from estates – has also been extended. From 3 December 2014, it will apply to all decorations and medals awarded to the armed services or emergency services personnel, and to awards made by the Crown for achievements and service in public life.
The 2015 Budget has been set for 18 March, so Mr Osborne may take the opportunity to put forward inheritance tax changes.
And with the general election on 7 May coming just seven weeks later, a change of government could also see a new approach to inheritance tax.
Whatever changes to the IHT regime may be on the way, Moore Thompson’s inheritance tax specialists can provide expert advice to legal advisors and their clients on mitigating IHT liabilities as part of wider estate planning. For more information, please contact us.