This chancellor recently scrapped plans to raise the threshold for inheritance tax(IHT) from £325, 000 to £350, 000 as he looked for to put apparent distance in between Labour and the Conservatives on the subject of wealth and aspiration.
In 2007, ministers promised to increase the threshold progressively in order that by April 2010 a single man might depart an estate of £350, 000 and a couple £700, 000 prior to their beneficiaries faced your tax bill.
This was in response to the Conservative proposal to increase it to £1m, which gave the party’s fortunes a major lift in 2007.
Nevertheless Alistair Darling said his announcement concerning allowances increasing to reflect inflation as well as thought continued house price growth had been created “before the financial crisis rocked the worldwide economy”.
“I don’t believe that raising this [ inheritance tax ] allowance may be a priority, given the impact of the downturn on the country’s finances. Therefore I have decided to freeze the individual allowance at £325, 000 for the next year, ” he said.
Simply 2. 5% of estates were likely to shell out IHT within 2009- 10, the Treasury said.
The chancellor’s move to freeze the inheritance tax allowance had been expected by a few commentators, who feel an attack on the Conservatives’ plans is likely to be central to the Labour party’s general election fight.
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In October it emerged there had been a dramatic fall in the number of families paying IHT, with officials predicting that 12, 000 households will shell out death duties this year – the lowest since data commenced in the late 1930s.
Figures produced through HM Revenue& Customs showed that the current government had presided more than the biggest decline in IHT payers.
The number of estates whose value takes them over the £325, 000 inheritance tax threshold may be anticipated to fall by twenty five percent for the period of this tax year.
Analysts state this cut may be a result of dropping building values, share market correction, and the 2007 move to make it possible for married couples and civil partners to transfer unused IHT allowance from a departed wife or husband to the surviving companion. The tax may be charged at 40% on all assets worth over £325, 000, even though everything left to a spouse or civil partner may be exempt.
Nicola Plant, a partner in the private client team at law firm Thomas Eggar, said that with the uk still in recession in addition to an election looming it was no great surprise that the chancellor had seen fit to freeze the IHT threshold.
” If building prices remain stable next year then the effect of freezing the IHT threshold will be minimal. this may prove to be a clever move by Darling, but not an effective fical decision approach. Labour may be viewed to be carrying out the right thing while at the same time really upsetting as few potential voters as possible, “she said.
This government also announced extra action on closing down schemes which have been used to avoid IHT by means of the use of trusts into which homes have been transferred.