Posted: Friday, 4 January 2019 @ 13:43
We are coming up to a general election and with respect to the Conservative Party it is highly likely that the Conservative Party will announce some form of inheritance tax (IHT) reform. Sensitive papers around the time of the budget revealed plans that would allow parents to pass a main property worth up to £1m to their children without paying any inheritance tax.
George Osborne has drawn up plans that would allow parents to pass a main property worth up to £1m to their children without paying any inheritance tax, according to Treasury papers leaked ahead of Wednesday’s budget.
The proposed measure would also reduce the inheritance tax bill on properties worth up to £2m by £140,000 and the Treasury analysis concludes that the scheme would “most likely benefit high income and wealthier households”.
According to the Guardian, the tax break would cost the Treasury nearly £1bn and is aimed primarily at southern propertied middle-class households.
This falls short of the previous pledge by the Conservative Party in 2009 to raise IHT threshold to £1million but is a step forward.
Beyond what is implemented by the Conservatives if they get back in, individuals can do some simple steps to mitigate IHT.New research has found that many life insurance policies could be liable to a big inheritance tax bill.
Legal & General's study of its own customer base found that over 90% of its customers with whole-of-life policies had done nothing to shield it from inheritance tax. The lump sum received from a life insurance policy counts towards a person’s estate when they die and is therefore liable for inheritance tax if over the tax-free allowance.
By writing a life insurance policy in trust, the amount the policy pays out on death can be paid directly to the trustees of the trust rather than the deceased’s legal estate. This means the proceeds won’t be taken into account when inheritance tax is calculated
The inheritance tax threshold in the UK for individuals is £325,000. Currently inheritance tax is due at a rate of 40% on anything above this amount.