A Government decision to link rises in the Inheritance Tax (IHT) and Capital Gains Tax (CGT) allowances to the the lower Consumer Prices Index (CPI) as opposed to the Retail Prices Index (RPI) will cause them to rise more slowly in future.
The legislation has been introduced within the Finance Bill 2012, and reflects the Government’s intention to link indexation rises for direct taxes to CPI instead of RPI.
The IHT nil rate band (NRB), which is presently £325,000, will remain frozen at its current level up to and including 2014/2015. It will then rise in line with CPI from 6th April 2015, rounded up the nearest £1,000, unless parliament determines a different amount should apply.
As announced in the Autumn Statement, the present annual CGT exemption amount of £10,600 will remain unchanged for the 2012/2013 tax year, and will then rise in line with CPI.
Latest figures available from the Office for National Statistics showed CPI annual inflation stood at 5% in October whereas RPI for was 5.4%.
In further news, the Chancellor, George Osborne, announced that the 2012 Budget will be held on Wednesday 21 March 2012.