Are you getting a sense of déjà vu here? Haven’t we heard this promise somewhere before? Yes to both of these questions: indeed, the Conservative Party used this enticement in their manifesto for the General Election back in 2010. However, when push came to shove and they were prompted to deliver on such a promise, they said they were unable to go ahead with this tax break after all, as the Liberal Democrats were so vehemently opposed to this move.
So, this begs the question: why on earth should we believe that the Conservatives are going to deliver on the promise this time around? The Prime Minister, David Cameron, has recently been saying that he and his party would very much like to deliver on this tax break after the next election; however, anyone with even a limited knowledge of trends in British politics will appreciate that the Conservative Party has a limited chance of winning an overall majority in the House of Commons in 2015.
At the end of the day, we are talking about a huge issue here. The current threshold for inheritance tax stands at £325,000. This means that anything in a deceased person’s estate over this figure (and this does mean everything in the estate!) will be taxed at a whopping 40%. In turn, this can mean that family properties and other assets are rendered unaffordable for the children and family members to pay tax on and are therefore lost within the family and sold.
David Cameron admits that inheritance tax should not be imposed on ordinary, hard-working families who have worked all of their lives to pass something on to their family. Instead, inheritance tax should only ever be applicable to richer families who are able to sustain and afford such a crippling tax rate. The simple fact of the matter is that many middle- and even working-class families are falling into this trap nowadays and are being forced to lose the family home and other equally treasured assets.
Of course, the other factor that has not really been discussed too much is the fact that the tax rate stands at a massive 40%. Why on earth does this need to be set so high? This accounts for nearly half of the estate over the £325,000 threshold going straight into the coffers of the Government – many people would maintain that that really is criminal! As with income tax, why is it that there is not a lower band of tax up to £1 million: perhaps of between 10% and 20%? This rate could then rise for assets valued over this threshold. However, a 40% tax rate is quite simply never justifiable when it comes to inheritance tax.
Obviously, when it comes to an increase in the inheritance tax threshold, it will be a case of wait and see. That said, no matter what, if the Conservatives do manage to form another coalition after the next election, it would be important for them to increase this threshold in some way; after all, it would be lovely for a party election manifesto to come to fruition, just for once.