Tory tax plans could lead to £44.2 billion in increased savings

25 million Brits would save an additional £44.2 billion per year for their dependants’ future if the threshold for paying inheritance tax were raised to £1 million, according to research from Abbey Savings.

When asked if they would save more for their dependants’ future were the threshold to be raised, 54.8 per cent of Brits said that they would save on average £1,756 more each per year.

The current threshold for inheritance tax is £300,000, which means that those with an estate worth less than £1 million could pay £280,000 less tax under the Tory plan.

This demonstrates savings incentive that adjusting the taxation system can have. The Household savings ratio is currently at its lowest level since the first quarter of 1960. Recent figures show that net August ISA sales were down 30 per cent on August sales from last year, and 58 per cent down on July 2007.

Such a fall is remarkable given that savings rates are attractive by historical standards, with many available significantly above base rate. Abbey has recently launched two new fixed-term savings accounts for their customers looking for a guaranteed return on an amount of money they can lock away until the end of the year.

Reza Attar-Zadeh, Head of Savings at Abbey, said: “This demonstrates the powerful effect that reducing taxation has on getting people to save more.

“Now is a great time for savings and savers should take advantage while the current market conditions last. Abbey has recently launched short term bonds offering 6.70 per cent. We also offer a Super Bond and Super ISA paying 8.1% fixed for one year and customers can earn up to 10% fixed for one year on our Super Monthly Saver.”