This chancellor today scrapped plans to raise the threshold for inheritance tax(IHT) from £325, 000 to £350, 000 as he looked for to place distinct distance between Labour and the Conservatives on the issue of wealth and aspiration.
Inheritance tax advice
In 2007, ministers promised to raise the threshold progressively in order that by April 2010 a single guy may well depart an estate of £350, 000 along with a couple £700, 000 sooner than their beneficiaries faced your tax bill.
This was in response to a Conservative proposal to raise it to £1m, which gave the party’s fortunes a major boost in 2007.
But Alistair Darling mentioned his announcement in relation to allowances rising to reflect inflation and thought continued property rate growth had been built “earlier than the financial crisis rocked the global economy”.
“I don’t feel that raising this IHT allowance may be a priority, given the impact of the downturn on the country’s monetary resource. Hence I have resolved to freeze the individual allowance at £325, 000 for the next 12 months, ” he said.
Simply two. 5% of estates were expected to pay IHT within 2009- 10, the Treasury said.
The chancellor’s move to freeze the IHT allowance had been anticipated by several commentators, who feel an attack on the Conservatives’ plans is likely to be central to the Labour party’s general election fight.
In October it emerged there had been a dramatic drop in the number of families paying IHT, with officials predicting that 12, 000 households will pay up death duties this year – the lowest since public records started in the late 1930s.
Figures produced by HM Revenue& Customs showed that the current government had presided above the biggest decline in inheritance tax payers.
The number of estates whose worth takes them over the £325, 000 IHT threshold is expected to lower by 25 % for the period of this tax yr.
Analysts state this cut is a result of dropping dwelling values, stock market correction, and the 2007 move to enable married couples plus civil partners to transfer unused IHT allowance from a departed wife or husband to the surviving companion. The tax is charged at 40% on every one resources worth over £325, 000, though anything left to a spouse or civil partner is exempt.
Nicola Plant, a partner in the private customer team at law firm Thomas Eggar, said that with the country still in recession as well as an election looming it was no great surprise that the chancellor had seen fit to freeze the IHT threshold.
” If house prices continue stable next year then the impact of freezing the inheritance tax threshold will be minimal. This could be a good move by the chancellor but not a great fiscal decision approach. Labour may be observed to be carrying out the best thing though at the same instance in reality upsetting as few possible voters as possible, “she said.
The government also declared further action on closing down schemes which have been used to bypass IHT via the use of trusts into which homes have been transferred.
inheritance tax advice