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Inheritance tax reform mooted

Inheritance tax reform mooted

Chancellor George Osborne has indicated that the Conservative Party intends to announce a reform of the rules on inheritance tax, which could result in far fewer people being affected by the death levy. Prime Minister David Cameron has previously made similar comments, arguing that the tax should only be imposed on “the rich”.

Rising property prices hit

Inheritance tax law is an area that has remained unchanged for many years, with critics saying that the rules are outdated and no longer reflect the purposes for which they were created. As a tax paid on a person’s death estate, including their property, money and possessions, it was originally designed to target some of society’s richest, when they made gifts or left an inheritance. However, the duty has become increasingly unpopular in recent years.

With steadily increasing property prices across the country, particularly in light of the values of property in London, a far greater proportion of people now exceed the threshold for paying inheritance tax. Currently set at £325,000 per person – with an effective £650,000 joint allowance for married couples – the tax-free threshold is now often consumed by the value of even a modest family home. A tax of 40% is then levied on any assets or funds that fall outside the threshold allowance.

In an interview with the Sunday Times, the Chancellor gave a strong signal that the Conservative Party has plans to make changes to inheritance tax. He said that before the May election, he would announce his intention to make the system fairer. This is likely to result in an increase to an individual’s tax-free allowance, with the result that fewer people will have to pay the tax at all. He stated “David Cameron has made it clear, as have I, that…inheritance tax is a tax that should be paid by the rich and we will set out our approach closer to the election”.

The proposed changes could prove influential on a range of voters, including pensioners and property-owners. However, the Conservative Party have had similar intentions previously. Before the 2010 election, the Party said it would increase the personal allowance to £1m, but after the formation of the coalition, the Liberal Democrats blocked the threshold changes.

The Chancellor also took the opportunity in the interview to confirm, that as it stands, he has no mind to increase the rate of VAT if his party wins the next election. Osborne insisted that he will address the deficit by reducing public spending and making welfare savings, rather than through tax increases.

Wills database gives a glimpse into history

Meanwhile, a new online government archive of wills has been launched, which allows the public to get a glimpse of history, and look at the final wishes of some famous figures.

The database, which contains some 41 million wills, with some dating back as far as 1858, is available to the public, with a £10 charge to obtain a copy of a will, while some other basic information is freely available. The resource can be used by the public to examine the history of their relatives, or alternatively, allows them to enquire as to the wishes of some notable historical figures. The archive features the wills of Sir Winston Churchill, Princess Dianna and Charles Dickens, to name just a few.

Despite the personal nature of a will, it is often overlooked that the legal documents are public and widely accessible, barring a few exceptions. It is hoped that the archive will be a point of interest, but will also raise awareness of the need for a will. A study released by Investec Wealth & Investment Management last year found that almost two-thirds of UK adults have not written a will – and that, of those that have, almost a third have let them become out of date.

If you still haven’t finalised your last wishes or would like to write a new will, want to leave money in trust for a young relative, or are struggling with probate issues, call one of our wills, trusts and probate solicitors on 01494 790002. Alternatively, email us at estatemanagement@ibblaw.co.uk.