15 May 2015 by

Election Blues – Our New Government’s Taxation Promises

Who would have thought it?  The Conservatives have pulled off a surprise victory and attained an outright, if slim, majority in Parliament.  Gone is the uncertainty of coalition; we already know what the Conservatives have pledged to do in office.  This article looks at some of the promises that have been made in relation to income tax and inheritance tax.

Income tax

Over the course of the next Parliament, income tax, National Insurance and VAT rates will not rise.  In addition, the higher rate income tax threshold, at which point the 40% rate becomes payable, will rise to £50,000 from the current £42,385, and the personal allowance will rise by £2,000 to £12,500 by 2020.

The income tax personal allowance will rise in line with the minimum wage, so that no person working 30 hours a week on the minimum wage will pay income tax.

There is however a sting in the tail in that tax relief on pension contributions for those earning over £150,000 per year will be curtailed to pay for the next flagship policy, which is….

Inheritance tax

The headlines say that the inheritance tax (IHT) threshold will rise from £325,000 to £1m; what has actually been announced is a new transferable £175,000 main home allowance to add to the existing nil-rate band of £325,000.  For a married couple this means IHT should not be payable on an estate worth under £1m; for a single person the threshold should now be £500,000.

However, as always, the devil is in the detail and it may be that the new main home allowance is not as generous as it first seems (depending on the composition of your estate, for example, and in what order the nil-rate band and main home allowance must be applied).  It seems as well that the new allowance will be gradually withdrawn on homes worth more than £2m, so families with homes worth more than £2.35m may not see any benefit at all from the new proposals.  There will also undoubtedly be questions about how the new allowance works for those who own more than one home.

Planning points

Whilst we’re still waiting for legislation to confirm when and how these pledges will be put into effect, one thing is certain; anyone potentially affected by the changes should stay up to date and ensure their financial affairs are adjusted to take into account of the new rules.

If you would like to review your IHT planning in light of the new rules please contact Iain Aitken 020 7288 4713 / iainaitken@boltburdon.co.uk or Jane Molyneaux 020 7288 4771 / janemolyneaux@boltburdon.co.uk

8 May 2015 by

Residential Property Jargon Buster…

In the busy world of residential property it can sometimes be taken for granted that buyers and sellers understand the […]

14 May 2015 by

Derivative mis-selling claims – next please?

As the FCA’s IRHP review scheme draws to a close (albeit that the independent reviewers are facing possible judicial review), […]

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