Conservatives Plan To Scrap UK Inheritance Tax

by Jason Gorringe, Tax-News.com, London

03 January 2005

Inheritance tax in the UK could be scrapped under tax reform plans being considered by the Conservative Party.

A reduction or removal of IHT is part of the Opposition’s pledge to remove the inequities and complexity of the tax system, and could cost a future Tory government some £2.9 billion in lost revenues.

However, citing independent research, the party claims that one in eight people will be caught in the Inheritance Tax net in five years’ time - compared with just one in 40 five years ago – if the current system remains unreformed.

While the inheritance tax threshold, currently £263,000, has risen by 32% since the Labour government came to power in 1997, house prices have soared by 138% over the same period.

"Inheritance tax is increasingly a tax on the homes of ordinary families. Around six million people are now living in homes which could be affected,” observed Shadow Chancellor Oliver Letwin.

To counter the growing IHT trap, Mr Letwin has proposed five options for reform: abolishing the tax; lowering the current 40% rate; exempting principal residences from inheritance tax; raising the current £263,000 threshold; and linking the threshold to increases in house prices.

“It is unfair to impose a high marginal rate of tax upon hard-working families who happen to live in parts of the country where property is expensive. I believe the tax system should support rather than penalise families building their financial security and independence,” Letwin stated.

Recommended