Inheritance tax threshold now £600,000

| October 11, 2007 | 0 Comments

The Chancellor Alistair Darling has doubled the limit of inheritance tax (IHT) so that most families will avoid paying anything on the first £600,000. Married couples will be able to combine their individual £300,000 allowances, this includes those in civil partnerships.

Alistair Darling said that as a result of the change, the joint married couples IHT limit would be raised to £700,000 from 2010. Gordon Brown previously announced that the individual limit would increase to £325,000 in 2008 and to £350,000 from 2010 when he was Chancellor.

A spokesperson for KPMG said this change is only giving to most people what they already have. Other experts said it was a clever move as it was declared that existing tax planning already granted families to take advantage of a £600,000 limit.

A spokesperson for Ernst & Young said according to government figures, IHT is only paid by approximately 35,000 people. It remains a highly controversial tax as far more people expect to have to pay in the future. It is obvious that the Chancellor wanted to address perceptions of increasing public resentment towards inheritance tax.

The spokesperson added that the change will be a real attraction for many middle homeowners in England but his proposals fell far short of what some had anticipated.

Presently, couples can pass on properties worth up to £600,000 inheritance tax-free but need to enter into a simple arrangement to do so. This could be done by owning separate shares in their property as tenants in common and setting up a nil rate band discretionary will trust.

The Chancellor’s move now makes the arrangements unnecessary in many instances, however, he has not made any moves to help those who live together but are unmarried or not civil partners.
Chiltern, the tax specialists, commented that the change is welcome as it will save couples the need for additional red tape when planning their wills. Most people would have already organised their wills to achieve this anyway, so this change won’t make a difference to them.

At last week’s Blackpool party conference, the Tories pledged that only those with assets of £1 million and over would be caught by the tax under a Conservative Government.

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