9.1 NIL-RATE BAND
The inheritance tax (IHT) nil-rate band has been increased from £250,000 to £255,000.
The increased threshold will apply to chargeable transfers occurring on or after 6 April 2003. The threshold is being increased by statutory indexation. It is estimated that 29,500 estates will be caught for inheritance tax in tax year 2003/04.
9.2 GENERAL PLANNING
Although no major changes to IHT have yet been made by this Government, complacency must be avoided. It would, therefore, be prudent to continue planning for the possible changes later in this Government's term of office and so make maximum use of the current rules. Don't forget that some six years ago the Labour Party publicly criticised the lack of bite in the inheritance tax regime.
In very brief terms the main advantages of the current inheritance tax regime are as follows:-
- a nil-rate band of £255,000 with a flat rate of tax on death (40%) over that amount
- the potentially exempt transfer rules
- a 100% maximum level of business property relief and agricultural property relief
- planning using deeds of variation
- lump sum inheritance tax schemes that avoid the gift with reservation rules
- advantageous rules for excluded property trusts.
All of these are areas that may well be targeted for harsher treatment under Labour in the future.