David Cameron said he still wishes to significantly reduce Inheritance Tax (IHT) and hinted that lifting the threshold would be a key priority in the Conservatives' 2015 election manifesto.
Speaking at a meeting in East Sussex, the Prime Minister stated that we should be encouraging people to pass things on to their children. He went further and suggested that Inheritance Tax should only be paid by “the rich” not by “people who have worked hard and saved and who have bought a family house.”
Back in 2007, then shadow chancellor George Osborne promised to triple the IHT threshold from £300,000 to £1 million if the Conservatives won power. Shortly after that, the Labour government approved changes to the IHT law to allow married couples and registered civil partners to raise the threshold on their estates to £650,000 when one of the spouses dies.
In almost all other cases, estates with a value higher than £325,000 are taxed at 40%.
A day after Cameron confirmed his ambition to help more people avoid getting caught in the IHT net, the Office for Budget Responsibility (OBR) issued its Budget forecast, which showed that over the next five years the amount of IHT receipts coming into the state will be higher than initially expected. According to the figures, the annual IHT receipts will reach £5.8 billion by 2018/19, up from £3.5 billion this year. The Treasury will get almost £1 billion more from the tax on inherited wealth and assets over the period than officials predicted three months ago.
In December the OBR said that the amount of IHT to be collected by the Treasury would rise to £5.6 billion in 2018/19 from £3.1 billion in 2012/13.