David Cameron stands to avoid up to £80,000 in inheritance tax after his mother gave him £200,000 following the death of his father, it emerged on Saturday, as the Prime Minister took the unprecedented step of publishing details of his tax returns.
Under current tax rules, Mr Cameron would be able to legitimately avoid paying inheritance tax, which could be as much as 40 per cent, if his 82-year-old mother Mary lives for another two years.
The approach is commonly used by tens of thousands of families a year to help reduce their tax liabilities by using a “lifetime gift”. However, a Downing Street source was unable to say whether the money from Mrs Cameron came from his father’s offshore investments.
A Downing Street source last night said that Mrs Cameron’s decision to give her son £200,000 was motivated by a desire to help him rather than reduce inheritance tax liabilities.
The accounts disclose that Mr Cameron has declared nearly £1.1 million in earnings over the past six years and paid £400,000 in income tax. Mr Cameron published the six years’ worth of accounts in an attempt to end speculation about his tax affairs after one of the most difficult weeks of his Premiership. The release – something never before done by a British prime minister or political leader – shows that his approach to his finances is not dissimilar to many other middle-class families.
In an emotional speech to Conservative activists yesterday he admitted that he “should have handled this better” and “will learn the lessons” from the row. Mr Cameron was last week forced to admit that he and his wife held a £30,000 stake in his father’s offshore company after questions about his tax affairs following the publication of the so-called “Panama Papers”.
The shares were sold four months before he became Prime Minister in 2010.
However, Downing Street last night refused to say whether an additional £72,000 worth of shares held by Mr Cameron before he became Prime Minister related to offshore companies.
It came after Mr Cameron took five different positions on his tax affairs in the space of a week amid allegations that he was hiding the truth. The tax disclosures also show that:
• David and Samantha Cameron have made more than £500,000 since 2010 by renting out their £2 million home in west London;
• Mr Cameron has saved himself £5,000 over the past two years from his Government’s decision to cut the top rate of tax from 50p to 45p in 2013;
• Mr and Mrs Cameron have benefited from an annual clothing and travel allowance worth up to £13,000.
Mr Cameron revealed in an interview last week that his father, Ian, left him an inheritance of £330,000.
He admitted that he did not know whether the money came from an offshore company.
No 10 sources last night disclosed that Mr Cameron’s mother also gave him £100,000 on two occasions, in May and July 2011.
Inheritance tax is not paid on sums left from one spouse to another, but is paid on an estate worth more than £325,000 before any sums are handed to family members.
If Mary Cameron lives for seven years after the gift then no inheritance tax will be paid on the sum by her estate when she dies.
The tax papers show Mr Cameron sold the additional £72,000 in shares in July 2010, months after he and Mrs Cameron sold their shares in his father’s company, Blairmore Holdings.
Regarding the second transaction, a Downing St source would not elaborate on what the shares were, beyond saying: “It’s a mixture of shares. There’s nothing wrong with holding shares in foreign companies.”
Separately, a new task force will investigate allegations of tax-dodging and money laundering linked to the Panama data leak. HMRC has requested access to the “Panama Papers” information held by the BBC, The Guardian and the International Consortium of Investigative Journalists.