Money
Retirement
Tories to overhaul inheritance tax
Inheritance tax bills would be scrapped for nine million families under a Conservative government, said shadow chancellor George Osborne at the Tory Party conference
Osborne has promised that the threshold for much-hated inheritance tax (IHT) would rise from £300,000 to £1 million. He said the change would benefit nine million families and ensure "only millionaires pay death duties".
Under current Government rules, estates valued in excess of £300,000 make them liable for a 40 per cent IHT bill. Last year, the tax boosted Labour's coffers by £3.5 billion and revenue is expected to hit £4 billion this year.
Once regarded as a tax for the rich, it now affects a large number of middle-income families since inheritance tax thresholds have failed to keep up with inflation and the UK's booming property market.
Osbourne has previously warned that the tax is becoming "increasingly unfair" because more and more people are having to pay it.
In Blackpool on Monday he said that the £3.1 billion cost of increasing the IHT threshold would be funded by imposing a £25,000 a year charge for non-domicile taxpayers.
"We will take the family home out of inheritance tax. In a Conservative Britain you will not be punished for working hard and saving hard," Osbourne said.
Inheritance tax was introduced 21 years ago when houses cost an average of £36,000. The threshold of £71,000 meant most households could safely ignore it.
While Gordon Brown announced in the last Budget that IHT thresholds will increase to £350,000 by 2010, experts and campaigners say it has not gone far enough.
Figures published earlier this year show that one million more homes will be valued above the IHT threshold in 2010 compared with 2001.
Until any changes come into play it's important for individuals to plan ahead to reduce the tax liability on your estate.
There are many ways to cut down the final bill - setting up trusts, making gifts to friends and family, leaving money to a charity and drawing up a will to specify how you would like your estate distributed are among them.
Plan ahead with the help of a professional, independent financial adviser who can help you decide the best approach.
Arranging ownership of the family home as tenants in common, rather than joint tenants, means your share of the property will not pass automatically to your spouse on your death - you can stipulate in a will who receives it.
* Written by Holly Thomas
