Sam Dunn: Inheritance tax has the common touch and that's no virtue
It isn't just the well-heeled who get whacked by IHT
Sunday 26 March 2006
"In this world nothing is certain but death and taxes," remarked Benjamin Franklin, one of the founding fathers of the United States of America.
Had he been able to see the future, he might have lumped the two together and added inheritance tax (IHT) to his list of certainties - for this charge is creeping from the outer fringes of many people's personal finance planning to the centre.
For years, you pay income tax, mortgage yourself to the hilt, save some cash (usually taxed), and plough money into an investment or two (ditto) - and what happens when you die and your pension (also taxed) stops paying out?
The taxman steps in and grabs a slice of your estate, to leave your loved ones clutching a smaller legacy.
From 6 April, any accumulated wealth over £285,000 will be taxed at 40 per cent at death - a threshold that will rise to £325,000 by 2009, Mr Brown announced in last week's Budget.
For more and more families, these figures will loom large. House price rises since the mid-1990s have catapulted hundreds of thousands of homeowners into the inheritance tax net.
Since 1996, property prices have risen by 176 per cent while the IHT threshold has grown by 85 per cent, reports the Halifax.
To underline the extent to which the Treasury's largesse has failed to keep pace with inflation in bricks and mortar, if the IHT threshold had been raised in line with house prices during this time, it would be £425,000 from 6 April.
Today, some 1.5 million homes in the UK are worth more than the £285,000 threshold, says the Halifax. And by 2020, this number is expected to treble to 4.6 million households.
Mr Brown says that only 6 per cent of estates pay IHT today, but that figure stood at just 3 per cent when he came to power.
Some critics, including the Express newspapers, have called for its abolition - a radical idea but one sure to result in lost tax revenues being squeezed from elsewhere in our finances.
Others just want it to be linked, as proposed by the Halifax, to house price rises.
The level at which you think IHT should apply will probably depend on your politics and personality.
A £285,000 threshold may be horribly close to home for many, but it is a fantasy sum for millions of others who might never amass the sort of wealth needed to test this limit.
What is clear, however, is that more savers are becoming trapped by the tax.
Where once it was only the well-heeled who got whacked, it's a levy likely to become increasingly familiar to ordinary families.
A review of IHT's growing importance, impact and structure is long overdue.
And why are 'southern' ways of speaking spreading north?
life + styleClarissa Baldwin is the brains behind the slogan 'A Dog is for Life not just for Christmas'
£1,430,000,000,000 (that's £1.43 trillion): Britain's personal debt timebomb
Banks are brought to account by switchers as growing number of people expect to be rewarded by their bank
Stock market: Looking for value left out there?
How to start your own internet business
Five ways to make money on the internet
- 1 Is this the scariest advert ever? Japanese tyre commercial comes with its own disclaimer and health warning
- 2 A forgotten episode in Russian history leaves links with the Philippines
- 3 Scientists sequence oldest human DNA from fossilised leg bone found in Spain
- 4 Cannabis can cause man boobs, US surgeon claims
- 5 Joanna Lumley’s garden bridge over the Thames gets £30m seal of approval from Government
iJobs Money & Business
£50000 - £65000 per annum + benefits + bonus: Harrington Starr: Market Data SM...
£50000 - £70000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£70000 - £85000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£75000 - £85000 per annum + Bonus and Benefits: Harrington Starr: An award win...
Day In a Page
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.
John Lennon's childhood home in Liverpool to be sold at auction. Guide price: £150,000-£250,000.
A six-bedroom detached period property with secluded gardens, ample parking and a double garage in Rye, £675,000.
A large split-level property with three double-bedrooms and roof terrace, close to Crouch End Broadway, £625,000.
A charming barn conversion in the picturesque Cotswold village of Ilmington with three bedrooms, a detached garage, workshop and beautifully manicured gardens £675,000.
A three-bedroom new build, ground-floor flat with two bathrooms, close to Bermondsey tube, £445,000.
A three-bedroom house in an enviable new development moments from Oxshott High Street, with secluded garden and decked area, £385,000
A two-bedroom split-level flat with stunning south-west facing roof terrace in the popular Brondesbury Conservation Area, £549,950.
A charming 16th century, three-bedroom detached house in Bidborough with picturesque garden
A top-floor one-bedroom flat in the heart of Pimlico with a terrace providing spectacular views over London, £495,000.