Government to freeze inheritance tax until 2019

POSTED: 11th February 2013
IN: Personal News

In a radical shake up of the social care system, the government has suggested it will freeze the inheritance tax threshold at £325,000 between 2015 and 2019.

It is hoped the change will help to fund a £75,000 cap on care costs to ease the financial burden on people in retirement.

For the average Briton however, there are certain considerations to take into account, such as whether a freeze on inheritance tax will have future repercussions for their finances.

While the threshold is £325,000 for individuals, it rises to £650,000 for couples, so the extent to which someone is affected could depend somewhat on their relationship status.

Matthew Stephens is an inheritance tax expert at Prudential and he believes this latest development creates a greater urgency to plan ahead for retirement.

A previous study from the insurer has shown 49 per cent of people intend to leave inheritance, although eight per cent would cancel these plans if they were too financially squeezed to see them through.

"Being able to leave an inheritance is important to many people, and the decision not to increase the inheritance tax threshold will have financial planning implications for anyone hoping to leave any money or assets to their loved ones," Mr Stephens said. 

Under the changes, individuals with a property worth more than £325,000 will be taxed at 40 per cent, or 36 per cent if they leave ten per cent or more of their estate to a charity.

Mr Stephens urged Britons to seek the advice of a financial planner if they hope to leave anything to their loved ones, with proposals to freeze inheritance tax meaning people "couple potentially face a sizeable tax bill if they do not plan ahead". 

Younger property owners may feel that the issue is not relevant to them, however, any potential changes to their finances should be heeded if they want to make the most of the value of their assets.

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