20th March 2013 at 7:09pm
There were no surprises about the starting threshold for inheritance tax (IHT) in today’s Budget.
And certainly no thawing.
A key update came last month when it was announced that the inheritance tax (IHT) threshold is to be frozen until 2018 at the earliest.
This shows the policy trade-offs involved in how the Government is paying the bills of an ageing population.
The IHT announcement was made at the same time as the proposed cap on the social care element of care costs.
This could bring some clarity to the care funding position.
Having a known maximum cost might provide greater encouragement for individuals to save or put aside funds in case they require care.
And if care is not needed, they would still have access to their savings, or funds could be passed on to their loved ones.
But back to IHT.
Under the microscope, a tiny increase in the IHT threshold from £325,000 to £329,000 had been announced in the Government’s Autumn Statement 2012. This is the IHT-free part of someone’s estate. But this increase has melted away and in any case would only have meant an IHT saving of £1,600.
That level of tax saving, in the context of someone with assets of more than £325,000 or a married couple with a combined estate worth more than £650,000, would not have transformed how wealth is transferred between generations.
When it comes to IHT, the priority remains to make use of exemptions and to start the clock early in making lifetime gifts, and to survive seven years afterwards.
There’s lots of ways to make Christmas, birthday, wedding or civil partnership gifts, as well as regular income gifts or one-off larger gifts, to reduce or remove IHT as an issue.
The key is to start early to avoid slipping up.
For more information see our expert’s blog posts.
Every person’s circumstances will be different and require advice. Standard Life accepts no responsibility for advice that may be formulated on the basis of this information.