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Government may increase IHT to 50%

Vantis head of inheritance tax planning Peter Legg says IHT could rise to 50 per cent as the Government seeks to bolster the public purse.

Speaking at a wealth generation seminar hosted by property asset manager London Central Property last week, Legg said that following the 50 per cent top rate of income tax announced in April’s Budget, IHT could be raised to the same level.

He said: “The rumour is that if income tax is going up to 50 per cent on high-net-income earners, then why shouldn’t inheritance tax follow suit?

“The Government has been bailing out the world and its dog so IHT at 50 per cent may be in the wings. If you are doing estate planning, it is a general truism that you do it when values are low rather than high so all the future growth in the value of the asset is outside the potentially taxable estate.”

The current IHT tax threshold for 2009/10 is £325,000 and tax is due on an individual’s estate at 40 per cent on the amount over this level.

Legg said Labour is only likely to introduce 50 per cent IHT if they regain power at the next election but, even under the Conservatives, clients need to plan their estates carefully as the Tories are no longer promising that a £1m IHT threshold would come in.

A spokesman for HMRC says: “Taxes are a matter for the Chancellor on a Budget by Budget basis.”

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