Brits paying £200m more inheritance tax

Monday, 24 July 2006 12:00

Britons paid £200 million more in inheritance tax in the first six months of the year, new research shows.

Rising property values mean that more and more people are becoming liable to pay the tax, which is charged at 40 per cent of all assets passed on over £285,000.

The chancellor increases this threshold in his budget - but these increases are not sufficient to keep up with house price growth meaning more and more people are becoming liable for the tax.

And research from Halifax shows in the first six months of 2006 Britons paid the Treasury a record £1.7 billion in inheritance tax - 13 per cent more than in the same period in 2005.

"Inheritance tax revenues are clearly on the rise and the £1.7 billion collected in the first half of this year matches the total inheritance tax take from the whole of the financial year in 1997/98," said Halifax group economist Tim Crawford.

Since the Labour government came to power in 1997, the amount of money people are charged in inheritance tax has more than doubled, and this is set to continue.

Even after the chancellor's plans to increase the threshold at which the tax is paid to £325,000 by 2009-10, Halifax calculates that this will not keep up with rising house prices.

Currently 1.5 million properties are valued above the inheritance tax threshold, and this could almost triple to 4.2 million homes by 2020 if the threshold is increased in line with retail price inflation as has been the case until now.

Calculations by Halifax show that if governments had increased the lower inheritance tax limit in line with rising house prices in the last ten years, it would now stand at £430,000 rather than £285,000.

"Inheritance tax revenues have risen because the threshold for the tax has failed to keep pace with the rise in property prices over the past ten years," Mr Crawford said.

"More and more homes are now valued above the threshold and more estates are now potentially liable for the tax.

"We call on the government to raise the inheritance tax threshold to £430,000 to account for the increase in property prices over the past ten years."

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