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IHT threshold to be raised

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8th Jul 2015
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George Osborne has increased the inheritance tax threshold, allowing £1m homes to be passed down to children after death to be free of tax.

Currently, IHT sits at 40% above a threshold of £325,000 for an individual and £650,000 for couples. From April 2017, a family homes allowance announced by the Chancellor will raise the threshold from £325,000 to £500,000 for an individual and up to £1m for couples.

Osborne derided the IHT status quo in his speech, labelling it “not fair”. “Inheritance tax was designed to be paid by the very rich, yet today there are more families pulled into the inheritance tax net than ever before - and the number is set to double over the next five years.”

Reacting to the change, Chas Roy-Chowdhury, ACCA head of taxation, said “The change to inheritance tax is a positive step, although he could have just removed the primary residence from the scope of the tax entirely. This would have made it a level playing field for all. He has introduced a highly complex system of relief tapers and carry forwards. 

“Many people imagine a house worth £1m to be a mansion but in the South East, and especially London, that is not the case.”

The cut in IHT will be funded by changes to pensions tax relief to high earners. From next year, their annual allowance will be tapered away to a minimum of £10,000.

Also hidden among the glut of Tax Information and Impact Notes released alongside the Budget, is interest changes to support the filing of digital IHT returns and to align the treatment of interest and penalties for inheritance tax purposes with other taxes.

The change will “extend the power to make regulations to allow the installment interest provisions relating to certain financial institutions and companies to be updated” and “clarify the period from when interest is charged”.

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Small Dog's RAT Return
By Oldmanwetmix
10th Jul 2015 14:14

My inheritance depends on this

If my unmarried Dad falls off his motorbike in June 2017 leaving me his house valued at £300,000 and cash of £300,000, will IHT be due on £175,000 or £275,000? Which asset will use up his nil rate band first?

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