The four-year freeze on Inheritance Tax allowance confirmed in the United Kingdom's June Budget represents a major tax increase in real terms on thousands of families in Northern Ireland.
Describing the move as a ‘stealth tax’, NI independent financial advisor Stephen Hill said that the move would seriously impact on the money passed from family members.
He believes that the freeze on the nil rate band, first mooted in the emergency March budget, has slipped under the radar and that local people here do not fully appreciate the potential impact.
“This freeze is tantamount to a huge increase in inheritance tax,” said Mr Hill, of S Hill & Co Investment Advisors.
“For while the tax allowance has been frozen, a person’s or a couple’s assets are likely to increase over the term until 2014/15.
“Despite the slump in house prices, there would be good number of people in Northern Ireland with a house worth over £325,000, plus other assets, and their descendents can expect to have to pay more in inheritance to the Government over the next four years.”
Mr Hill explained that currently for a person who dies leaving a £500,000 estate; his inheritors could expect to pay tax of £70,000. However, assuming a relatively cautious growth of 5pc over the next five years, the estate would be worth over £638,000, leaving the inheritors to pay a tax bill of £125,000 – a 79 pc increase over the 2010 liability.
He went on to say that the Budget represented a ‘mixed bag’ for high earners and believed that although there was a 10 pc increase in Capital Gains Tax, most high earners will be viewing this as an opportunity to move to a capital profit, rather than an income profit.
“If you are a high earner, earning over £150,000, there’s now an opportunity to pay 28 pc capital gains tax rather than 50 pc income tax through good tax planning so I expect a lot of individuals will be working to move into declaring a capital profit instead.
“The capital gains tax increase impacts more in Northern Ireland as we traditionally have a higher proportion of landlords and investors in buy-to let-property. Despite the increase, this will undoubtedly help to give a push to the local property market.
“I personally am very interested to see the details and the results of the Bank Levy over the government’s term. The idea is very welcome but experience shows the customer somehow always pays for the banks’ pain eventually.”
