The General Election 2015 – A first glance at the policies that may shape Will writing in the future
With the upcoming Government election we take a look at the policies from the seven main political parties relevant to the Will writing profession that may have an impact on succession and inheritance in the near future.
The Conservative Party
- Take the family home out of tax for all but the richest by increasing the Inheritance Tax threshold for married couples and civil partners to £1 million.
- Introduce a new transferable main residence allowance of £175,000 per person (this will be paid for by reducing tax relief on pension contributions for people earning more than £150,000) – this will come on top of the existing £325,000 tax free allowance and will mean that individuals who die and pass on assets worth up to £500,000 will be charged no inheritance tax at all.
- Increase the annual tax charges paid by individuals with non-domiciled status, which will ensure that they make a fair contribution to reducing the deficit and continue to tackle abuses of having a non-domiciled status.
- Increase the income taxpersonal allowance to £12,500
- Raise the threshold for the 40% higher tax rate band to £50,000.
- Introduce legislation so that the income tax personal allowance automatically rises in line with the national minimum wage.
Conservatives have also listed policies already introduced since they have been in power for the last 5 years:
- Guaranteed that ISAs can now be passed on to a spouse tax free, so that from April 2015 they are no longer subject to income and capital gains tax.
- Have abolished 55 per cent tax on pension pots so that when the deceased is 75 or over any beneficiary only has to pay their marginal income tax rate (normally 20%) when they draw down the pension.
- Have enabled any deceased under the age of 75 to pass on their pension pot completely tax free so that beneficiaries will pay no tax on pensions they inherit or on the income they draw down.
- Have already implemented the first part of Care Act 2014 and the second part of the Act will take effect from April 2016, which will cap residential social care and allow deferred payment agreements so that nobody has to sell their home.
You can read the Conservative full manifesto here: https://www.conservatives.com/manifesto
- Abolish the non-domicile status rules so that all individuals who make the UK their home will pay tax in the same way as all the other tax payers. Only those individuals who are genuinely temporarily resident in the UK can be taxed only on their UK income.
- Support measures to cap the cost of care
- Introduce a mansion tax on properties worth over £2 million, the threshold rising in line with house prices for these properties. This will help raise £2.5 billion per year and will protect those on lower incomes by a right to defer the charge until the property changes hands.
- Close tax loopholes and introduce tougher penalties for those abusing the tax system.
- Reduce tax relief on pension contributions for people earning more than £150,000 a year.
- Reduce the tax relief on pension contributions for around 300,000 people earning more than £150,000.
- Re-introduce the 50% top rate of income tax for the highest 1% of people earning over £150,000 a year.
- Introduce a lower 10% starting rate of income tax which will be paid for by ending the transferable marriage tax allowance.
You can read the Labour full manifesto here: http://www.labour.org.uk/manifesto
- Restrict access to non-domiciled status, by removing the link with a father’s domicile of origin. Increasing the charges paid to adopt this status and ending the ability to inherit it, therefore raising £130m a year from 2016/17.
- Establish a review to consider the case for, and practical implications of, introducing a single rate of tax relief for pensions contributions, which would be designed to be simpler and fairer and set more generously than the current 20% basic rate relief
- Crack down on international tax avoidance and evasion.
- Raise the income tax personal allowance to £12,500 by the end of the next Parliament.
- Reduce the annual exempt amount for Capital Gains Tax to £2,500.
- Abolish the transferable marriage tax allowance.
- Allow individuals to transfer unused elements of their income tax personal allowance to offset against CGT liabilities.
- Not increase income tax, NICs or VAT.
- Introduce a tax on homes worth over £2 million in a banded structure.
- Press ahead with plans to allow more freedom in the use of pension pots.
Whilst the Liberal Democrats have been in Government they have helped secure the cap on the cost of care that will be introduced in 2017.
You can read the Liberal Democrats full manifesto here: http://www.libdems.org.uk/read-the-full-manifesto
- Abolish Inheritance Tax altogether.
- Increase the personal allowance to at least £13,000, therefore ending income tax on the minimum wage
- Refrain from introducing any form of mansion tax
- Create a new income tax structure with a basic rate (20%), a new intermediate rate (30%) and a top rate (40%).
- Increase the transferable tax allowance for married couples and civil partners to £1,500.
You can read UKIP full manifesto here: http://www.ukip.org/manifesto2015
- A “wealth tax” of 2% a year would be introduced on individuals with assets of more than £3 million. This aims to raise about £25 billion a year by the end of the Parliament. This is with the exception of farmers with agricultural land worth less than £10 million and also an exception for payment deferral for the cash poor until the sale of a property.
- Abolish the non-domiciled status rules
- Abolish the Capital Gains Tax personal allowance (raising around £3.8 billion a year)
- Abolish the Inheritance Tax seven year rules for potentially exempt transfers, therefore making all lifetime gifts to an Accession Tax, with exceptions for small annual amounts.
- Tighten up the rules and tax treatment for certain Trusts often used for IHT planning.
- Turn Inheritance Tax into an Accessions Tax. The level of tax would depend on the wealth of the recipient and not the donor. Any bequests to individual recipients who have less than £200,000 would be tax free.
- Abolish the income tax personal allowance but pay everyone legally resident in the UK a guaranteed, basic income or pension, non-means-tested and sufficient to cover basic needs.
- Raise the top rate of income tax to 60%.
- Overall, close tax loopholes and crack down on tax avoidance.
You can read the Green Party full manifesto here: https://www.greenparty.org.uk/we-stand-for/2015-manifesto.html
Scottish National Party
- Abolish the non-domiciled tax status.
- Back a proposed review of the pension tax relief available to the wealthiest individuals.
- Introduce a mansion tax on properties valued at over £2 million.
- Reintroduce the 50% top rate of income tax.
- Reversal of the transferable marriage tax allowance.
- An overall crackdown on tax avoidance.
You can read the Scottish National Party full manifesto here: http://www.snp.org/node/15170
- Strengthen anti-avoidance legislation and the fight against tax avoidance by increasing HMRC staff numbers.
- Abolish higher rate pension tax relief.
- Re-introduce a 50% income tax rate for those earning over £150,000.
You can read the Plaid Cymru full manifesto here: https://www.partyof.wales/2015-manifesto/