The Chancellor, Alistair Darling, has revealed plans to double the inheritance tax (IHT) threshold for couples.
In his Pre-Budget Report (PBR), delivered to cabinet members this afternoon, Darling outlined plans to increase the IHT threshold to £600,000. It will then increase to £700,000 by 2010.
This increase will also be backdated indefinitely for every widow and widower.
Darling said that the main reason behind his decision was that he wanted to see spousal benefits factored into the inheritance tax laws. He also said that the Tories' proposed £1 million IHT threshold was unworkable - especially as there were not enough non-domiciled individuals from which to reclaim the economic deficit this would create. Darling said it would effectively end up costing £2 billion to the taxpayer - money which he proposes to channel into health and education instead.
This move was welcomed by most, but Philippa Gee, Investment Director at Torquil Clark, fails to see any benefit.
She said: "Lets examine the facts. Up until yesterday, spouse A could put in place a discretionary Will Trust, so that on their death £300,000 would be moved to their beneficiaries without Inheritance Tax. Then on the death of spouse B, an additional £300,000 could be passed free of Inheritance Tax. Therefore for those willing to involve a solicitor and take a more detailed approach to their wills, they are simply no better off today, than they were yesterday.
"The rise to £700,000 in three years time is a feeble attempt and we will be asking for this to be reviewed to a minimum of £850,000, in order to recognise and appropriately deal with this unfair tax.”
However, Peter Penneycard, Tax Partner at PKF, admitted grudging admiration for the Chancellor's highly creative response to the Tories' plan to raise the inheritance tax threshold to £1 million.
He explained: ""The vote winning potential of the Tories' election-busting IHT proposal certainly stirred up Darling's creative juices. By doubling the inheritance tax threshold for married couples and civil partnerships to £600,000 immediately and to £700,000 by 2010, he has not only stolen the Tories' thunder but will ease the tax burden for millions of hard-working families."
The Chancellor also announced plans to simplify capital gains tax by removing taper relief and plans to increase the level of housebuilding to 240,000 per annum by 2016.
Date: 9th, October, 2007
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