YORKSHIRE people who regard their home as a long-term asset could see a large part of their wealth eaten up by death duties, it has been claimed.
There has been a mixed reaction to the coalition Government’s confirmation that the limit at which inheritance tax (IHT) becomes payable will be frozen at £325,000 until 2014-2015.
Some Yorkshire-based analysts have described the move as disappointing, while others have said that it should lead to more consumers taking steps to manage their finances.
A Treasury spokesman told the Yorkshire Post that any changes to IHT would have to be considered in relation to the Government’s plans to cut the deficit and secure economic recovery.
Angela Beech, a senior tax partner at chartered accountants Blick Rothenberg, said: “This is a huge blow for those who have seen their assets increase over the last couple of decades due to house price inflation.”
Andrew Turnbull, the chairman and head of pensions at law firm Walker Morris, said the announcement would come as “a great disappointment” to those who treated their property assets not just as a home but as an investment in their family’s future. Dermot Callinan, KPMG’s Leeds-based UK head of private client, said: “The nil rate band for IHT purposes remains frozen at £325,000 until April 2015, but the Finance Bill confirmed that from 2015/2016 it will increase annually by the Consumer Price Index (CPI) measure of inflation.
“For some, the continued freeze, and rather modest future lifts to the band, will be disappointing given property values of £325,000 and above are not the preserve of the wealthy any more. The result of property values historically rising by more than the nil rate band is IHT impacting on many people’s estates, at least in theory.
“However, assets including property can pass between spouses tax free and then, on the death of the second spouse, IHT only takes effect after double the individual IHT allowances, which would currently stand at £650,000.”
As a result, Mr Callinan does not believe that the picture for married couples is too bleak. He also highlighted the fact that property values have been static or falling in recent years.
Paul Captieux, a tax partner at Clough Taxation Solutions, said it was no surprise that the IHT nil rate band had been frozen.
Mr Captieux said Yorkshire had suffered from house price deflation over the last three or four years. Analysts predict that house prices will not have reached 2007 levels by the time the band is reviewed in 2015. Mr Captieux said the impact of IHT can be minimised with help from tax professionals.
Karl Lavery, of Leeds-based Manse Capital, said: “This is simply an extension of what we already knew. However, it does re-enforce the need for those whose estates exceed the value of the £325,000 to plan ahead.”
A Treasury spokesman said: “In the March 2010 Budget, the limit at which inheritance tax becomes payable was frozen at £325,000 until 2014-15. This was confirmed in the June 2010 emergency Budget. The Government has prioritised changes to personal allowances for income tax over other tax cuts, including cuts to inheritance tax.
“Our plans will take 1.1 million of the lowest paid out of tax altogether.”