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General Election 2015 – tax changes in the coming parliament?

  • May 20, 2015
  • By Hunters Law

The Conservative Party’s surprising General Election win means that their manifesto pledges may well now become law, including those on tax.

 

For those who did not read the main parties’ manifestos cover-to-cover (and memorise them), here is a brief summary of some of the Conservatives’ pledges on tax, the first three of which they had announced previously. The Government intends to make the following income tax changes:

  • increase the personal allowance from £10,600 to £12,500 by 2020;
  • raise the higher-rate threshold from £42,385 to £50,000 by 2020;
  • enable married couples and civil partners to transfer £1,060 of their tax-free income to their spouse or civil partner, where the highest earner is a basic-rate taxpayer(N.B. – this doesn’t apply to higher rate taxpayers), with the transferable amount to rise in line with the personal allowance; and
  • reduce tax relief on pension contributions for taxpayers earning over £150,000.

The headline-grabbing inheritance tax pledge was of course to ‘remove family homes worth up to £1,000,000 from tax’. In practice, this would mean the introduction of a new transferable main residence allowance of £175,000, on top of the existing transferable nil rate band of £325,000. Only on the second death of a married couple or civil partners would there be no inheritance tax to pay on the first £1,000,000 of their estate, provided there had been no inheritance tax to pay at all on the first death (perhaps because it passed entirely to the surviving spouse or civil partner), the second spouse or civil partner’s own nil rate band was entirely intact and their estate included a property used as their main residence.

These are of course manifesto pledges, and whether and when they come into law remains to be seen. Perhaps they should be best viewed as mere aspirations in the interim.

For more information, please contact the partner at Hunters having responsibility for your legal matters, or (for new enquiries) please contact a partner in the Private Client team.

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