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Conservative party signals pre-election promise on inheritance tax

Monday, 12 January, 2015

The Conservative party looks likely to promise an increase in the inheritance tax (IHT) exemption thresholds before the general election in May.

Chancellor George Osborne told a newspaper this weekend that he and Prime Minister David Cameron believe that IHT should only be paid by the rich 'and we will set out our further approach closer to the election'.

This echoes a statement by David Cameron last October to the effect that IHT should be restricted to 'the very wealthy', and that family homes should not be caught by it.

The Conservative manifesto for the 2010 election promised to increase the personal IHT threshold to GBP1 million, but the party was unable to implement this measure after failing to gain a parliamentary majority. Their coalition partners, the Liberal Democrats, oppose any cuts to IHT, and the threshold has been frozen at GBP325,000.

The continuing property market boom in the south-east of England has drawn many more families into the net. By April last year, HM Revenue and Customs receipts from inheritance tax were nearly back at the record levels achieved just before the transferable nil-rate band was introduced. Proceeds for the tax year 2013-14 were GBP3.42 billion, the highest since 2007-08 when HMRC collected GBP3.83 billion.

If the threshold remains unchanged, the number of estates being charged inheritance tax is predicted to rise from 26,337 in 2013-14 to 43,800 in 2015-16. According to research by the Institute for Fiscal Studies, one in ten estates will be paying inheritance tax by 2018.

  • The final budget of this government's term will be issued on 18 March, with parliament to be dissolved on 30 March in advance of the general election. However, an election strategy speech given by David Cameron today does not mention IHT. Instead, it promises to generate a budget surplus by cutting public spending and 'cracking down on tax avoidance and ensuring those who can afford to pay the most do'.

Sources