George Osborne Inheritance Tax Promise, What Does it All Mean?
After already having made great changes to savings and pensions, George Osborne’s latest proposition is both exciting and revolutionary.
For a long time inheritance tax has been something we just had to put up with, the 55% tax on both money and assets inherited from our relatives always seemed to be a final fly in the ointment.
At present inheritance tax is at 40% for assets over £325,000 per person(2014/2015), however the tax on unused pensions is sky high at 55%, this percentage applies to every £ within the unused pot as opposed to having a threshold. This is due to the fact thatpension savings aren’t considered as part of someone’s estate for inheritance tax.
What does this mean?
As a result of this change, when someone dies under the age of 75, their pension pot won’t be taxed at all, leaving the recipient with the full amount. If someone dies over the age of 75 then instead of paying the current 55%, they will now pay their own “marginal” rate of income tax based on their current earnings, this is the current rate at which their earnings are taxed.
This acts as a fantastic incentive for those saving for a pension to continue to save into a large pension pot in order to pass on their unused savings to their children.
Mr Osborne told the Conservative party conference: “People who have worked and saved all their lives will be able to pass on their hard-earned pensions to their families tax free. The children and grandchildren and others who benefit will get the same tax treatment on this income as on any other, but only when they choose to draw it down.”
It’s always great when we’re given the right tools by the government to save for our futures. Ernest Grant are here to make sure you can make the most of both your life and your retirement with our lifetime planning , find out what we can do for you today.