Well the well leaked rumour and gossip about George Osborne increasing inheritance Tax to £1 million in tomorrow’s budget is going to be great for virtually all of us. Right?
Currently a married couple (or civil partnership) have a maximum tax free allowance of £325,000 each or £650,000 as a couple. The expected change is to create an additional £175,000 allowance per person for the value of your home only. When combined this means £350,000 per couple which takes us up to the £1 million mark.
Looks good so far but some of the downsides as I see them.
- No doubt it won’t be introduced immediately but delayed. The press quote “reliable sources” about the delay being until April 2017.
- According to the ONS, there are only five constituencies in the UK where the average house price is between £650,000 and a £1 million. Not surprisingly, they are all in London which won’t really help the rest of us. There’s another which is even higher than the £1 million mark! Also in London.
- What happens if you downsize like a lot of parents whose kids leave the family home? Will they lose out or will there be another rumoured workaround about it applying to current or previous homes? Holiday homes?
- This allowance will only apply to a residence and not savings or other assets.
- Assuming that George Osborne does indeed create this new allowance, then I’m guessing there will be a rush to get your home revalued which brings its own risks. Higher values will probably mean higher insurance costs too. Certain areas whose houses are near the threshold will see an increase in buyers which will see their values increase.
I have tried to avoid making political comment about the rights and wrongs of this change. I’ll leave that to the press.
Well that’s what my crystal ball is telling me … we’ll see how good it is tomorrow.
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