Our budget views in blue: Inheritance Tax
No changes to the headline rate (40%) or the nil rate band which remains £325,000.
This has stayed the same for 3 years. The other little exemptions (annual exemptions of £3000 etc.) have stayed the same for almost a decade. In real terms inheritance tax goes up every year.
Government policy is pointing to getting more tax revenue from these other taxes. It gets very little press attention but is not necessarily fair.
Reduced rate of 36% where more than 10% of estate is left to charity, applies to death occurring on or after 6 April 2012.
Let’s use an example
Say someone had £1.325m left in his estate
Normally 40% x £1m (1.325m – 0.325m) = 400k is chargeable to tax leaving his heirs £925k.
However, under new rules if he gives 10% (132.5k) to charity the tax is £347k. His heirs are left with £845.5k (79.k worse off)
Overall this could be attractive as there is less tax loss and his intention may have been somewhat charitable in any case.