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

News
people
News
people And here is why...
News
peopleStella McCartney apologises over controversial Instagram picture
Life and Style
Laid bare: the Good2Go app ensures people have a chance to make their intentions clear about having sex
techCould Good2Go end disputes about sexual consent - without being a passion-killer?
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Richard Burr remains the baker to beat on the Great British Bake Off
tvRichard remains the baker to beat as Chetna begins to flake
News
i100
Sport
footballArsenal 4 Galatasaray 1: Wenger celebrates 18th anniversary in style
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
News
people
News
The village was originally named Llansanffraid-ym-Mechain after the Celtic female Saint Brigit, but the name was changed 150 years ago to Llansantffraid – a decision which suggests the incorrect gender of the saint
newsWelsh town changes its name, but can you spot the difference?
Arts and Entertainment
Kristen Scott Thomas in Electra at the Old Vic
theatreReview: Kristin Scott Thomas is magnificent in a five-star performance of ‘Electra’
News
Destructive discourse: Jewish boys look at anti-Semitic graffiti sprayed on to the walls of the synagogue in March 2006, near Tel Aviv
peopleAt the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity
Life and Style
Couples who boast about their relationship have been condemned as the most annoying Facebook users
tech
Arts and Entertainment
Hayley Williams performs with Paramore in New York
musicParamore singer says 'Steal Your Girl' is itself stolen from a New Found Glory hit
News
i100
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

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Trust Accountant - Kent

    NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

    Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

    £18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

    Law Costs

    Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

    Day In a Page

    Italian couples fake UK divorce scam on an ‘industrial scale’

    Welcome to Maidenhead, the divorce capital of... Italy

    A look at the the legal tourists who exploited our liberal dissolution rules
    Time to stop running: At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity

    Time to stop running

    At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity
    Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

    Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

    The vintage series has often been criticised for racial stereotyping
    An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

    An app for the amorous

    Could Good2Go end disputes about sexual consent - without being a passion-killer?
    Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

    Llansanffraid is now Llansantffraid

    Welsh town changes its name, but can you spot the difference?
    Charlotte Riley: At the peak of her powers

    Charlotte Riley: At the peak of her powers

    After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
    She's having a laugh: Britain's female comedians have never had it so good

    She's having a laugh

    Britain's female comedians have never had it so good, says stand-up Natalie Haynes
    Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

    Let there be light

    Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
    Great British Bake Off, semi-final, review: Richard remains the baker to beat

    Tensions rise in Bake Off's pastry week

    Richard remains the baker to beat as Chetna begins to flake
    Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

    A look to the future

    It's time travel fashion at Louis Vuitton in Paris
    The 10 best bedspreads

    The 10 best bedspreads

    Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
    Arsenal vs Galatasaray: Five things we learnt from the Emirates

    Arsenal vs Galatasaray

    Five things we learnt from the Gunners' Champions League victory at the Emirates
    Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

    Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

    This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
    Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

    The children orphaned by Ebola...

    ... then rejected by surviving relatives over fear of infection
    Pride: Are censors pandering to homophobia?

    Are censors pandering to homophobia?

    US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence