budget = more of us will pay more in Inheritance Tax

theGrinch

The Chancellor also used today's Budget to announce an increase in the inheritance tax threshold. At present the 40 per cent death duty is payable on estates worth more than £275,000 but this will increase to £325,000 by 2009-10, Mr Brown said.

The move was immediately dismissed by industry commentators who said far from reducing the number of estates caught in the inheritance tax net, more people would end up paying the charge as house prices were likely to increase at a faster rate.

Clive Mackintosh, tax partner at PricewaterhouseCoopers, said: "It is disappointing, but not surprising, that the Chancellor has missed another opportunity to announce a reform of this tax. A re-examination of inheritance tax is urgently required to assess whether it is addressing what it set out to do.

"We urge the Government to reform this increasingly outmoded tax, which is operating against objectives set in the nineteenth century."


This is from the following article
http://business.timesonline.co.uk/article/0,,28089-2098678,00.html

marcais

I don't understand that.

Even if house prices increase at a faster rate, there must still surely be fewer of them above the threshold than if it was kept at £275k.

I mean a house that on Monday was valued at £270k isn't going to jump to £330k just because of this, but it would have been likely to go above £275k shortly of its own steam.

It sounds more like whining because it didn't get increased by as much as they would have like, or their preferred option, wiped out altogether.

AceCobra

Depends on your opinion, if you employer gave you a yearly pay rise of 1%.... Its a payrise but you still lose out due to it being lower than inflation.

Martin.

NastyMatt

"The move was immediately dismissed by industry commentators who said far from reducing the number of estates caught in the inheritance tax net, more people would end up paying the charge as house prices were likely to increase at a faster rate."

Quite clearly these industry commentators do not frequent this board as doom sayers here are predicting a market crash.. so this increase will help loads of people

zappahey

It doesn't matter. You're dead, you won't need it any more.

Lorian

Your family might need it.

zappahey

I would suggest that if you're leaving over £325k, then your family will be sufficiently comfortable even after paying the tax. We should perhaps be conscious of the difference between wants and needs.

Lil_Dee_2

Lorian - I couldn't agree more !! As someone who lost their mother just under 18 months ago, I can vouch for the fact that your remaining family would benefit from this tax being abolished. In my case our solicitor (a good one, recommended by two independant family members, who are both experinced in the legal field) is still battling the I.R. (or whoever it is that wants their cut of my mums hard-earned belongings) and it's looking like we owe £100k in tax. Why ? Because she owned property that she bought before prices rocketed, which in turn is now worth substantially more than she paid for it. So, for her remaining family (my brother and I) to be able to pay our 'bill', we have to sell the property that my mum intended to use for her retirement (by renting them out, having no mortgage on them) and then leave to us, to help us and our families out. Only we can't do this anymore, because the government wants 40% of almost everything she ever had. And she worked damned hard too.

Makes my blood boil to think of the solicitors fees we're having to pay, on top of the bill they're preparing for us. The government want to tax my dead mother. What kind of society do we live in where they can do this legally ? It defies belief.

Zappahey, I hope you never have to find out what it's like.

Omertron

Zappahey,

My parents paid £20k for their cottage over 25 years ago. Conservative estimate is that the house is now worth upwards of £300k, they have none, if any, savings. So, when they finally die, my brother and I will be stuck with a bill of over £120k if we want to keep the house. How are we comfortably off? If we then try and sell the house, we'll be caught by even more tax (capital gains on unearned income).

Not many people I know have £120k lying around to be able to pay inheritence tax just after their parents have died, I'd be lucky to have 1/10th of that.

EDIT: What Lil Dee said, only less eloquently

NastyMatt

Anyone else notice that the raise in the inheritance threshold comes into effect in 2009 but the tax WE have to pay i.e. raise in car tax etc is effective immediately.

I am guessing any "loss" the govt. may have made will well and truly by covered by the extra income generated by the other taxes rising.

exil

On 300k, you will only pay 40% tax on the value over the threshold, NOT 120k!

You will still be left with at least 290k.

As has been said, I may WANT to inherit huge wodges of tax-free cash, but I don't NEED to. Which is just as well, since there is no chance of me doing so. OK, you could say that I'm jealous. I am not, actually, since I don't consider my parents owe me anything.

I don't see why you would pay CGT unless you actually keep the house and sell it later on - in which case you would, but then so does every one else who has a 2nd house.

I do consider there is a case to raise the threshold (to, say 2 x average house price) - but wherever you put it some people will have to pay - unless you agree with the Express and want it abolished.

Only 6% of estates pay IHT - before the war it was more like 20%, and even as late as the 60s and 70s it was over 10%.

If there is no IHT then rich property owners will be able to pass on houses and other property untaxed to their offspring, who will then be able to build up big property empires since they won't have to earn the money to buy their own. Which means less houses available to the rest of us.