Inheritance tax (IHT) figures disputedConservative party claims tax will hit millions
31 December 2009
The Conservative party has challenged government estimates of the number of people likely to pay inheritance tax in the future.
The Conservatives argue that 4 million adults live in households where the average wealth is over the IHT threshold of £325,000, using statistics from a new report from the Office for National Statistics (ONS) on Wealth in Great Britain. This shows that wealth held in property and private pensions each accounts for 39% of the total amount of private net worth. The median household net worth was £204,500 in 2006-08. Philip Hammond, the shadow chief secretary to the Treasury was reported as saying: 'These figures show that inheritance tax remains a threat for millions of families under Labour'
Tory claims that over 4m people could be caught by IHT contrast strongly with official Treasury figures for 2008-9 and estimates for 2009-10. These show that inheritance tax receipts fell by 25% in 2008-09, from £3.9bn in 2007-08 to £2.9bn, 'principally due to the impact of the 2007 Pre-Budget Report measure on transferable tax-free allowances for married couples and civil partners.' According to ONS figures, the number of estates that paid IHT in 2006-7 was actually 34,379, approximately 6% of the 570,000 deaths notified for that year.
The 2007 concession of a 'double allowance' for married couples and civil partners effectively doubles the IHT nil-rate band for many from £325,000 to £650,000. This will reduce number of estates liable to pay IHT and cut the amount payable by those that are over the threshold. A further reduction was expected after the collapse of house prices during 2008 but estimates of IHT revenue in 2010-11 were increased slightly in the Pre-Budget Report, to take account of the 'stabilisation of the housing market'. It is now expected to raise £2.3bn.
Ian Robinson, Which? Senior Researcher, commented: 'There are many ways to reduce your liability to IHT, from elaborate trusts and estate planning to simple lifetime gifts which utilise an individual's annual tax-free allowance and the rules regarding potential exempt transfers (PETs). Before taking any action it is sensible to check the rules and take professional advice from a qualified independent financial adviser (IFA).'
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