Don't get too excited by pre-election promises
We have less than 100 days remaining before we go to the polls to vote on who we would like to represent us in the House of Commons. But judging by the amount of hot political air currently being expelled by all three main parties, you would think the General Election was scheduled for February, not May.
Although most of the political focus so far has been on the funding of the NHS, we are already beginning to get an idea as to how the Conservatives, Labour and Liberal Democrats will affect our personal finances if they form the next government – alone or in coalition.
Wallet-enhancing promises are being made by all three mainstream parties, although it must be remembered that it's not until a government is formed that nasty tax hikes suddenly rear their head - a real possibility this time around, irrespective of who forms the next government, given the country's stretched finances and the parlous state of the world economy.
The Conservatives have probably given most indication of what they would like to do to empower the finances of households. Since their party conference in Birmingham last autumn, they have promised to increase the threshold at which 40% inheritance tax (IHT) is paid.
This currently stands at £325,000 – £650,000 for married couples – but the Prime Minister has already said IHT should only be paid by the 'very wealthy'. A threshold of £1 million is likely and the Chancellor has already said he will spell out his precise plans for reform of the tax ahead of the May election.
The party has also promised to raise the tax-free personal allowance to £12,500 by 2020 - most people are currently entitled to £10,000 (£10,600 from the start of the new tax year). In addition, it has said it will increase the threshold at which people start paying higher-rate tax to £50,000.The 40% rate is currently payable on income above £41,865.
Labour has not been so forthcoming on the personal finance front. Obsessed with the NHS, it continues determined to demonstrate its support for it by introducing a mansion tax on properties valued at more than £2 million – despite growing opposition among some Labour grandees.
It is also likely Labour would restrict the tax reliefs that higher-rate taxpayers presently enjoy when saving into a private pension. It has, however, said that it will not stop in its tracks the freeing up of the pensions market that will begin in April – allowing people greater freedom over access to their pension savings once they reach age 55.
Like the Conservatives, the Liberal Democrats are keen to see tax-free personal allowances rise to £12,500.
And like Labour, they have an eye on the tax reliefs enjoyed by higher-rate taxpayers who save into pensions. But unlike Labour, they have actually spelt out their intentions - a further reduction in the amount that can be saved into pension savings without tax charges being applied.
It has said it will shrink this allowance from £1.25 million to £1 million. It's a move that would compromise the pensions of many hard-working people employed in key services such as the NHS. Liberal Democrat Steve Webb, pensions minister, has also said he would like to see whether a single rate of tax relief for pension saving is a fairer way forward.
Some pensioners would lose out under the Lib Dems with higher-rate taxpayers missing out on entitlement to winter fuel payments and free TV licences.
Me? I can't wait until 7 May is over and done with. In the meantime, I will put my trust in the Institute for Fiscal Studies to scrutinise independently the pledges of all three parties (its 2015 election website - election2015.ifs.org.uk - is a must view) rather than get carried away by any pre-election promise made by a mainstream political party.
Jeff Prestridge is the personal finance editor of the Mail on Sunday. Email him at email@example.com
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.