Downing Street has said it is considering axing inheritance tax next Spring, a move which will surely give the Conservatives a boost before next year’s General Election.
Inheritance tax is charged on the part of someone’s estate above the tax-free threshold of £325,000. However, this can rise to £500,000 if a home is given to a child or grandchild.
The news that inheritance and income tax cuts are being considered has been welcomed by many Conservative MPs.
Defence Secretary Grant Shapps has called inheritance tax as “deeply unfair” and “punitive”.
He said: “I think it’s a question, for many people, of aspiration, and people know that there’s something deeply unfair about being taxed all their lives and then being taxed in death as well.”
David Jones MP, a former Wales secretary added:
“Both income tax and inheritance tax need to be cut. Inheritance tax, in particular, should be abolished. It is an immoral tax on assets that have mostly been amassed out of taxed income. In my experience, it is arguably the most hated tax of all.”
Ranil Jayawardena MP, a former Cabinet minister said: “Time is running out, and the Government needs to be bold. It’s time to axe the death tax.
“It’s a double tax, because it’s a tax on money which has already been taxed, and it piles on the pressure at the most sad and stressful of times. It is the least popular of taxes with people of all incomes because it is anti-aspirational, anti-family and is simply unfair. It needs to go.
“Of course, the Government should seek to reform income tax to make it family-friendly too. Married couples and civil partners should have fully transferable income tax allowances, which would particularly help working-age parents with children when a family’s finances are tested the most. Let’s reward people who are trying to do the right thing.”
The current inheritance tax rate is set at 40 per cent. However, it’s only charged on the part of your estate that’s above the threshold. For example if your estate is currently worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000).
