More estates liable for IHT after allowance changes

New legislation introduced as part of the Finance Bill 2012 provides that inheritance tax and capital gains tax-free allowances will rise in line with the lower consumer prices index (CPI), as opposed to the retail prices index (RPI), which will result in more estates being liable for payment of inheritance tax.

It is expected that 900 more estates will pay inheritance tax totalling approximately £20million in 2015-16 as result of linking allowances to the CPI.

The current nil rate band for inheritance tax is £325,000 and this will remain unchanged until after the 2014-15 tax year. From 6th April 2015 the allowance amount will increase in line with the CPI (rounded up to the nearest £1,000). The capital gains tax exemption allowance of £10,600 will begin to rise in line with CPI after the 2012-13 tax year.

The most recent figures from the Office for National Statistics showed CPI annual inflation stood at 5%, compared to 5.4% for the RPI.

If you live in Northern Ireland and require advice on inheritance tax, capital gains tax, or general tax planning, contact Wilson Nesbitt in Belfast or Bangor by email at tax@wilson-nesbitt.com or by calling 0800 840 9288 .