Inheritance Tax (IHT)
Currently IHT is charged at 40% on estates over £325,000.
Any unused allowance can be transferred to your spouse, so a married couple has £650,000 between them before IHT is paid.
From April 2017 the Government has introduced a family home allowance of £175,000 per person (which is also transferable between spouses) aimed at allowing families to pass the family home down to children and grandchildren without paying IHT.
This means a married couple will have £1 million between them before they pay IHT.
To us this seems to be more of a political gesture. According to HMRC, IHT only made up 0.7% of the total tax take for 2013/14.
Tax relief on pension contributions
According to the Summer Budget document, to pay for the reform to IHT and to control the cost of tax relief on pensions in the short term, the Government will restrict tax relief on pension contributions from April 2016.
A tapered reduction to the £40,000 annual allowance will apply to those with adjusted annual incomes (including personal and employer pension contributions) over £150,000. What does this mean? The incentive to save in a pension scheme is now greatly reduced for very high earners.
Paul Lindfield, Director of Wealth Management at Sedulo says,
This announcement was not particularly surprising.
There has been a lot of speculation in the press over recent months about whether tax relief on pension contributions is too generous.