IHT threshold increase receives lukewarm welcome

Chancellor Gordon Brown's budget on Wednesday included the announcement that the inheritance tax (IHT) threshold will increase from £285,000 to £300,000 in 2007-2008 with further incremental increases with the target of raising the bar to £350,000 by 2010.

Experts across Britain and Northern Ireland do welcome any increase in the threshold, which the chancellor claims will ensure that 94 per cent of estates will be exempt from the tax.

However, some commentators suggest that IHT, a levy which was meant to affect only the rich, will continue to hit working families unless they can get exemplary advice from their solicitor.

Melanie Bien, a director at Savills Private Finance told Reuters: "It's fairly safe to assume that the people affected will be middle-income families rather than the wealthy, who have access to good tax-planning advice."

Other experts say that the increase has not been made in line with inflation of house prices. Since 1995/96 overall house prices have increased by 199 per cent, more than double the increase in the IHT threshold.

Barry Naisbitt, chief economist at Abbey, commented: "Very many people - particularly those who have owned their own home for five to ten years or more - now have substantial assets as the value of their homes have risen significantly.

"To account for that rise completely, the chancellor would have had to increase the IHT threshold to around £460,000. So this is an issue many hope will be revisited next year."

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