Coalition backtracks on Inheritance Tax rise

Following the deal thrashed out between Conservatives and the Liberal Democrats, the planned rise in the Inheritance tax threshold will be scrapped, and a rise in the income tax threshold will be implemented, The changes are two of the policy compromises to arise from the coalition deal between the two parties, who have both agreed to keep Gordon Brown's 1p National Insurance rise for individuals, though not businesses. David Cameron had repeatedly attacked the NI policy during the campaign.
Capital gains tax on non-business assets will also rise, from 18% to 40%, hitting individuals when they sell second homes and other assets. The deal sees the Tories making concessions to their new partners in exchange for their support in the House of Commons.
On inheritance tax (IHT) the Conservatives manifesto had included plans to raise the threshold before which the tax was payable to £1m. Currently, the 40% tax is payable on the value of estates above £325,000 when an individual dies, with a combined threshold of £650,000 for couples.
Following the emergence of the coalition deal yesterday, a Conservative source said: 'Inheritance tax has been sacrificed as a priority. That is unlikely to be achieved within this parliament.'
The Conservatives have also agreed to work towards the implementation of a key Lib Dem tax policy – the raising of the level at which income tax becomes payable to £10,000. Currently, individuals must earn £6,475 in a tax year before they have to pay tax. A rise in the threshold benefits lower earners. It would be an expensive change to make, estimated to cost about £17bn. The parties said this would be funded partly by raising capital gains tax for non-business assets so it is closer to the level of income tax.
The parties said that this change would be a long term goal with a promise to take 'real terms steps each year towards this objective'.