Among the measures announced in the recent Pre-Budget Report were somewhat familiar sounding (if the accounting community and Conservative Party are to be believed) changes to the UK's inheritance tax regime.
Chancellor of the Exchequer, Alistair Darling announced that the individual inheritance tax allowance would rise from GBP300,000 today to GBP350,000 in April 2010.
Additionally, the inheritance tax allowance will be transferable between spouses or between civil partners. This will enable all married couples and civil partners to automatically benefit from double the tax-free allowance in addition to their existing entitlement to full spouse relief. This measure will also be extended to all widows, widowers and bereaved civil partners.
As a result of Tuesday's announcements the married couples' and civil partners’ allowance now stands at GBP600,000 for this year and will rise to GBP700,000 in April 2010.
The proposal has been broadly welcomed, and John Riches, Deputy Chair of the Society of Trust and Estate Planners (STEP) observed following delivery of the Pre-Budget Report that:
"Middle England will breath a sigh of relief at the Chancellor's reforms which undo a large part of the impact of house price inflation in dragging couples into IHT . For couples whose wealth is principally tied up in a family home, making full use of the nil-rate band on the death of a first spouse was not always easy. Under these proposals, couples will now be able benefit fully from both partner's exemptions without the need for complex planning on a first death. Effectively the collective exempt band for couples and civil partners will be GBP600,000, or double the new nil rate band of GBP300,000."'
He continued:
"A particular feature of the new proposals which STEP welcome is the fact that widows/widowers and surviving civil partners will also benefit because those who have already lost their partner will now be able to make use of their deceased partner's potentially otherwise wasted allowance. Where surviving partners have not felt able to make gifts during lifetime, the fear of wasting a tax exemption and paying additional tax will be lessened."
The full text of Alistair Darling's Pre-Budget Report speech can be found in the Tax News Resources section.
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