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Finance (No. 2) Bill

As we have heard, there is a divergence of opinion on what the Bill means. The Red Book suggests that only £15 million would be raised by the changes to inheritance tax and trusts, and that the new regulations would affect only a small number of people. However, the evidence given to the Treasury Committee by John Whiting suggested that the changes would affect a lot of everyday arrangements and a huge number of individuals. The Times suggested that they would affect 100,000 families, and the Society of Trust and Estate Practitioners went further, estimating that at least 1 million wills would be affected. The society also estimated that the average cost of rewriting a will was £250. If we multiply that by 1 million, we see that the cost to individuals of rewriting their wills would stand at £250 million, while the benefit to the Treasury of the changes would be £15 million. It is easy to see the disparity between the number of people likely to be affected and the amount of money raised. Skandia estimated that up to 4.5 million life insurance policies could be affected by the changes, because so many families have life insurance policies written into trusts. Given that the nil rate band does not stay in line with inflation, more and more families will be drawn into the lower end of the system. Therefore, it is not only those who presently fall into the inheritance tax band who will be going back to their solicitors to change their life insurance policies. This will also affect people who are unsure at what point in the future their estate might fall into the inheritance tax band.