Budget: Inheritance/Capital Gains Tax
Saturday 13 March 1999
From April, estates worth less than pounds 231,000 will escape inheritance tax, after the threshold is lifted by pounds 8,000.
Similarly the ceiling on capital gains tax (CGT) is lifted from pounds 6,800 to pounds 7,100, and in future it will be levied at either 20 per cent or 40 per cent. Following the introduction of a new 10 per cent starting rate, the 23 per cent rate is to be abolished.
The Chancellor of the Exchequer, Gordon Brown, has however, put in place measures to prevent wealthy people from passing substantial property to the next generation, following the House of Lords ruling in favour of Lady Ingram.
To protect the family estate from inheritance tax, she devised a complex deal which involved giving her property to her solicitor, while placing the freehold in a trust for her children, and obtaining a lease for herself.
The legal loophole exploited by these arrangements has now been closed. Less imaginative attempts to give away a family home while continuing to live there, would always have fallen foul of the Inland Revenue, unless the former owner paid a commercial rent.
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