Will David Cameron Really Drop the Inheritance Tax Threshold?

David Cameron’s proposal to increase the inheritance tax threshold has been met with applause from the public at large but has certainly left financial experts sceptical, particularly as the Conservative’s promised this reform in their last manifesto in 2010 and it failed to materialise.

Safe with a Note Saying Inheritance Tax!

Inheritance tax is paid by a single person with an estate worth more than £325,000, or for married couples and civil partners, a combined value of £650,000. Any assets above that threshold are taxed at 40 per cent.

However, David Cameron told Saga members in Peacehaven, Sussex that “inheritance tax should only be paid for by the rich…It shouldn’t be paid for by people who have worked hard and saved, and bought a family house in, say, Peacehaven.”

He told his audience that the Conservatives will make a manifesto pledge to raise the inheritance tax threshold at next year’s general election.

The question remains: is this an honest policy to write a societal wrong or an electioneering tactic to further increase the Tories’ strongest support base – the 50+ crowd?

As a result of the shocking house price rise (particularly in London), inheritance tax has raised around £800 million more than forecast in just three months, reported the Office of Budget Responsibility. Looking further ahead, they forecast that the Treasury collection of inheritance tax would rise from £3.1 billion to £6.4 billion between 2012 and 2018.

Is the Conservative government likely to greatly diminish this obvious tax cash cow? The increase would certainly be a step in the right direction, but the cost to the treasury might simply be too great.