There was no movement on inheritance tax (IHT) thresholds in the 2015 Budget, despite speculation beforehand over a measure allowing estates worth up to £1 million to be passed on IHT-free.
The Guardian reported on 17 March, the day before the Budget, that a “sensitive” Treasury paper had set out plans for a reform to the regime enabling a family home to be passed on to the children (including step-children and adopted children) of the deceased person without creating a inheritance tax liability.
The document, published on the Guardian website, set out plans for a main residence nil rate band of £175,000 per person, transferable between married couples or civil partners. It said that “in certain circumstances” this measure would allow a surviving spouse or civil partner to pass on up to £1 million of assets with no IHT to pay.
IHT is payable at a rate of 40 per cent on estates worth more than £325,000. In 2013-14, around five per cent of estates were estimated to have an IHT liability but last year the Office of Budget Responsibility suggested that this figure would rise to 9.9 per cent by 2018-19, chiefly due to rising house prices.
The £325,000 threshold, which is effectively doubled for married couples and civil partners, has applied since April 2009.
However, George Osborne’s Budget contained no significant new announcements on inheritance tax, other than that the government would carry out a review of the use of deeds of variation in relation to IHT.
If all the beneficiaries agree, a deed of variation can be used to change the terms of a will, which can help to reduce inheritance tax bills.
Deeds of variation hit the headlines in February following claims over the way Labour leader Ed Miliband inherited a share of his parents’ home. He confirmed that his mother had set up a deed of variation after the death of his father more than 20 years ago and a Labour spokesman said he subsequently paid 40 per cent capital gains tax when the house was sold in the 2004-05 financial year.
There are a range of ways in which to maximise IHT efficiency and Moore Thompson’s tax specialists can provide expert advice, tailored to individual circumstances, to ensure all reliefs and allowances are claimed and to identify further tax planning measures.
For more information on how Moore Thompson’s IHT experts can help you, please contact us.