The recent announcement by the government that the nil rate band for inheritance tax will be frozen at £325k until at least 2017/18 means that the allowance will not have changed for 9 full tax years if there is not a further reversal of policy.
This decision is itself a reversal of the announcement made in the autumn statement 2012 which promised an increase in the year 2015/16.
This announcement can be seen in the context of the government’s attacks on their core middle class voters with policies such as ending Child Allowance where anyone in the household earns more than £50k.
For the vast majority of people, the value of their property makes up the bulk of their estate on death. Although property prices have stagnated in large parts of the country over the last 5 years, London has been an exception. As a result, the freezing of allowances penalises Londoners and those in more prosperous areas of the south east. Thus freezing the allowance is going to significantly increase the number of people who pay inheritance tax and the amount of tax that is collected. This goes against the calls from commentators in recent times that inheritance tax should be abolished in order to allow money to flow through the economy and be used to fund economic growth.
In the two way pull between the abolitionists and those who favour increasing death duties, it is clear the latter are in the ascendancy at the moment.
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