Gordon Brown has announced the Inheritance Tax threshold will increase to £350,000 by 2010, which he claims will ensure 94% of estates do not fall into the IHT net.
At the moment, the threshold is £285,000, which increases to £300,000 for the year 2007-2008, however in his speech today the Chancellor announced the IHT threshold will rise annually to end at £350,000 for the 2010-11 tax year, to continue to provide a “fair and targeted system”.
The IHT threshold will move from £300,000 for the 2007-08 year, starting in April, to £312,000 in 2008-09, £325,000 for the year 2009-10, and increasing to £350,000 in 2010-11.
In addition, Brown raised the annual exemption for capital gains tax from £8,800 to £9,200, and will be £18,400 for married couples, while he confirmed the Pension Credit Guarantee will rise from £114 per week at the moment to £119, then £124, increasing to £130 a week in 2009-10.
He points out this will give elderly pensioners with little or no works pension around £6,750 a year, as he says the pension credit is being raised by earnings levels as the government moves towards the commitment of linking the basic state pension to earnings.
Carolyn Stepper, director of private clients at KPMG, says: "This is no change from the current position where 6% of estates pay IHT. Since the band has not been increased in line with house prices, we can expect the 94% figure to be optimistic. It is worth noting that under Gordon Brown the number of estates paying IHT has nearly doubled from 18,000 in 1997 to 35,000 this year."
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