IHT thresholds

By Danny Cox | 02 Oct, 2008 

Apparently the Conservative party will increase the Inheritance Tax threshold from £312,000 up to £1m if elected.

For a married couple (or civil partnership) this means that estates will potentially be Inheritance Tax free up to £2m.

This is good news as it will mean that thousands currently caught in the IHT trap will be released. But it also means that an estimated £4bn of tax revenue will need to be found elsewhere.

Does this mean that Inheritance Tax plans can go on hold? Well first we have to assume that the Tories get in at the next election. Then we have to assume that they honour their pledge and that they do so in a timely fashion. So it might not happen for years, if at all.

In my view you can’t make plans based on what ifs and have to work on what you know is going to happen. 

I think that it is also important to say that the types of actions you might take that are Inheritance Tax efficient, are done with another purpose in mind – the Inheritance Tax bit is actually secondary. For example gifting or setting up a trust fund is because we want to help our families, pay school fees, give the grandchildren a great start in life, provide deposits for houses etc.  The IHT savings make the decision to do so much easier. 

So my thinking is that if you are planning to make a gift or set up a trust, the Tory proposals shouldn’t change your mind. If their proposals become law, you haven’t really lost anything, and if they don’t, you should still save the tax.