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 obvious distance in between Labour and the Conservatives on the matter of wealth and aspiration.
In 2007, ministers promised to increase your threshold progressively in order that by April 2010 an individual guy can depart an estate of £350, 000 in addition to a couple £700, 000 earlier than their beneficiaries faced your tax bill.
This was in response to a Conservative proposal to increase it to £1m, which gave the party’s fortunes a major increase in 2007.
Although Alistair Darling said his announcement concerning allowances increasing to reflect inflation as well as thought continued home price growth had been made “prior to the financial crisis rocked the world-wide economy”.
“I don’t feel that raising this [ inheritance tax allowance may be a priority, given the impact of the downturn on the country’s monetary resource. Therefore I have resolved to freeze the individual allowance at £325, 000 for the next year, ” he said.
Just two. 5% of estates were expected to shell out IHT within 2009- 10, the Treasury said.
The chancellor’s move to freeze the inheritance tax allowance had been expected by various commentators, who believe an attack on the Conservatives’ plans is likely to be central to the Labour party’s common election fight.
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In October it emerged there had been a dramatic drop in the number of people paying IHT, with officials predicting that 12, 000 households might shell out death duties this year – the lowest since data started in the late 1930s.
Figures produced by HM Revenue& Customs showed that the current government had presided above the largest decline in inheritance tax payers.
The number of estates whose worth takes them over the £325, 000 IHT threshold is anticipated to lower by 25 % for the period of this tax season.
Analysts say the cut is a result of falling home prices, stock market correction, and the 2007 move to enable married couples as well as civil partners to transfer unused inheritance tax allowance from a departed spouse to the surviving companion. The tax can be charged at 40% on all assets worth over £325, 000, even though anything left to a spouse or civil partner can be exempt.
Nicola Plant, a partner in the private customer team at law company Thomas Eggar, said that with the uk still in recession along with an election looming it was no big surprise that the chancellor had seen fit to freeze the inheritance tax threshold.
” If home prices continue stable next year then the result of freezing the IHT threshold will be minimal. This is, therefore, a shrewd political move by the chancellor, rather than an effective fiscal approach. Labour may be viewed to be doing the best thing and at the same period basically upsetting as few likely voters as possible, “she said.
This government also announced additional action on closing down schemes which have been used to avoid inheritance tax by way of the use of trusts into which properties have been transferred.
