Plans to increase the inheritance tax threshold to £1m was first pledged by the Conservatives seven years ago. This proposal made in the Tory manifesto has since been altered so that when pensioners decide to downsize in terms of property any potential children will not miss out on the tax break. This decision comes as George Osborne unveils plans to finally end inheritance tax on properties worth up to £1m.
This policy is said to take an estimated 94% of people out of the inheritance tax altogether. The current system means that individuals who inherit will have to pay a 40% tax on wealth over £325,000 for a single person or 40% on £650,000 for a married couple or civil partners. Therefore, from 2017 changes will see the current thresholds raised to £500,000 and £1m retrospectively. It is important to note that this increase will only apply to property and not other forms of wealth. This £175,000 increase is set to be called 'family home allowance'.
This change is set to come into force April 2017 and is to be funded by pension tax reliefs for those who earn over £150,000. In addition, the Chancellor will allow people who have owned valuable homes to defer their allowance until death, even if they moved out of the property decades earlier.
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