STEP reports that a further 650,000 families could be brought into the inheritance tax net under a Labour government, after last week’s budget froze the nil rate band at GBP325,000 until at least April 2014.
Read the full article on the STEP Journal or read the extract below
It had been known since last autumn’s pre-budget report that Chancellor Alistair Darling would freeze the 2010-11 NRB at the previous year’s figure of GBP325,000. But the four-year freeze (obviously only relevant if Labour wins the general election) was a surprise.
The 650,000 figure comes from Frank Nash of accountants Blick Rothenberg, quoted in the Daily Telegraph. Nash says the freeze could cost a couple an additional GBP37,000 in IHT in real terms over four years, if inflation continues at around 3 per cent.
It will particularly affect couples whose joint assets are worth over GBP650,000, said Richard Mannion of accountancy firm Smith & Williamson.
“With the IHT rate currently at 40 per cent this may result in a significant further financial burden, especially for those whose wealth is wrapped up in property with little liquid cash”, he said. “The freezing of the nil rate band does create clear political water between Labour and the Conservatives.”
John Richardson, head of advice policy at Towry Law, said the long freeze would lead more families to consider estate planning opportunities, and more trustees to consider tax-efficient investment structures to minimise the ten-year anniversary charges.
As already reported, the Treasury will this summer work out a method of bringing inheritance tax planning into the list of activities that have to be reported to HM Revenue & Customs as tax avoidance schemes – the the Disclosure of Tax Avoidance Scheme (DOTAS) rules.