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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