Osborne set to raise IHT threshold to £1m for couples

6 July 2015
Inheritance tax (IHT) will only be payable on family homes worth £1 million or more, chancellor George Osborne has confirmed. Currently, any value in an estate worth more than the £325,000 per person threshold (£650,000 for couples) is subject to IHT of 40%. But writing in The Times over the weekend, Osborne and prime minister David Cameron say the threshold for couples will rise to £1 million from April 2017. According to reports, however, the chancellor will announce an additional £175,000 tax-free allowance per person for their main property on top of the existing allowance - which applies to all assets - in his emergency Budget on Wednesday. UnfairWednesday's 'blue Budget' will be the first all-Tory Budget delivered since 1996 and, although many commentators have speculated on what will likely be included, Osborne has developed a reputation for Budget surprises during his time as chancellor. Although the change to IHT will benefit society's highest net-worth homeowners – notably those who own property in London - financial advice firm Portal Financial says the move would be 'unfair' if funded by a cut to pension tax relief. The criticisms come in light of other widely expected moves to lower the lifetime pension allowance from £1.25 million to £1 million, and reduce pension tax relief on a sliding scale for those earning more than £150,000. "This policy is so ill-thought out that it does not consider the size of the pension fund," says Portal managing director Jamie Smith-Thompson, "so if a high earner has a very small pension they still cannot contribute more than the £10,000 a year. "In the past five years alone we have seen a reduction in annual allowance from £255,000 to £40,000, and the lifetime allowance has almost halved from £1.8 million to £1 million. How can anyone be expected to save in confidence if the rules and allowance keep changing?" This article was written for our sister website Money Observer

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