Increase in threshold designed to stem revolt

The Chancellor attempted to head off a growing middle-class revolt over inheritance tax (IHT) with above-inflation increases in the threshold at which the duty is payable.

The Chancellor attempted to head off a growing middle-class revolt over inheritance tax (IHT) with above-inflation increases in the threshold at which the duty is payable.

Mr Brown said he would raise the value of estates above which the 40 per cent duty is payable from £263,000 to £275,000 in the 2005-06 tax year. There will be further increases to £285,000 and £300,000 in the 2006-07 and 2007-08 tax years respectively.

The move was a break from the Chancellor's usual practice of simply raising the threshold in line with inflation. It is also the first time that he has announced more than one year's increase at a time.

The rises follow mounting concern that IHT will become an issue for increasing numbers of families because the price of property - most people's most valuable possession - has risen so much more quickly than general inflation over the past 10 years. The Conservative leader, Michael Howard, has already indicated that a significant rise in IHT thresholds is likely to be in the Tory election manifesto.

The Chancellor said yesterday that just 6 per cent of all deaths in the current tax year would result in IHT liability for those inheriting estates. But Mike Warburton, a partner at the accountants Grant Thornton, said the figure was misleading. "Inland Revenue figures show that around 40 per cent of people who die each year are survived by their husband or wife," he said. "As estates are always free of IHT when they are passed to a spouse, it is actually more like one in 10 estates that are now caught by IHT."

Halifax warned that the relatively small number of estates paying IHT masked a larger potential problem for future taxpayers. Research from the bank shows 2.4 million properties are now worth more than the tax threshold, with 14 per cent of all property sales over the past year above the cap, compared with 3 per cent 10 years ago.

The bank said if the IHT threshold had been raised in line with house price inflation over the same period, it would now stand at £390,000. As a result, revenues from the tax are set to hit £3.3bn by next April, more than double the £1.6bn which was taken in 1996-97.

IHT advisers gave yesterday's increases to the threshold a lukewarm welcome, even though the average rise of about 4.5 per cent was well ahead of the current rate of inflation.

Stephen Herring, a tax partner at the accountants BDO Stoy Hayward, said: "We are disappointed the Chancellor has not mirrored the 100 per cent increase applied to the stamp duty threshold, which is also driven by house price inflation." Bob Rothenberg, a partner at the accountants Blick Rothenberg, said: "What Mr Brown has done is very limited: he's announced several years worth of thresholds in advance in order to be able to say the cap will reach £300,000."

* From December, when new laws enabling same-sex partners to officially register their relationships take effect, gay couples will be entitled to the same IHT exemptions as husbands and wives. All asset transfers between married couples in their lifetimes and on death are free from IHT. However, the exemptions will not be extended to unmarried heterosexual couples.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Sport
Luis Suarez and Lionel Messi during Barcelona training in August
footballPete Jenson co-ghost wrote Suarez’s autobiography and reveals how desperate he's been to return
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
newsSam Smith’s Mobo triumph is just the latest example of a trend
News
Laurence Easeman and Russell Brand
people
Sport
Fans of Dulwich Hamlet FC at their ground Champion Hill
footballFans are rejecting the £2,000 season tickets, officious stewarding, and airline-stadium sponsorship
News
Shami Chakrabarti
people
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
filmBenedict Cumberbatch reignites Star Wars 7 rumours
Sport
football
News
news
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Data Analyst/Planning and Performance – Surrey – Up to £35k

    £30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker