Inheritance tax payments to soar to £21billion as house prices rise
The amount families will have to pay in inheritance tax is set to increase by £3billion to £21billion over the next five years.
The rise is due to the revival of the housing market, which is increasing the value of properties.
Meanwhile, Chancellor George Osborne has announced he’ll be introducing new measures making it more difficult for families to protect their assets by using trusts.
The current threshold for inheritance tax is £325,000, set in April 2011. There is a 40% inheritance tax on any assets beyond that sum.
The government has frozen the threshold until 2018, meaning the actual value is decreasing because of inflation. The value of the £325,000 is also being affected by the unexpected upturn in the housing market. House prices are predicted to have risen 25% by 2018, compared to their value in 2011 when the threshold was set.
The government is also planning to make it more difficult to protect assets within trusts. The details are yet to be finalised but will involve changes to the treatment of income from trust assets. For example, income from such assets will have to be distributed within five years. If it isn’t, it will be treated as capital, meaning that beneficiaries will have to pay more tax.
The government is still consulting on the proposals. We shall keep clients informed of developments.
Please contact Nic Pestell if you would like more information about the issues raised in this article or any aspect of tax planning.