Mon, 10 Apr 06
The Halifax group estimates that the number of properties in the UK valued at more than the 2006/07 inheritance tax (IHT) threshold of £285,000 now stands at 1.5 million, or 8% of all owner-occupied properties.
The bank projects this will nearly triple to 4.2 million properties by 2020 if the threshold is only increased in line with retail price inflation. And this calculation takes into account threshold rises already announced up to 2009/10.
It projects that the revenue collected by the Exchequer from IHT could rise to £5.5 billion a year in today's money by 2020. That is a 244% increase from the £1.6bn the Exchequer received in 1996/97, the last time the IHT threshold was raised significantly.
IHT threshold would be £425,000 if linked to house price movements
Successive governments have failed to increase the IHT threshold inline with house price growth. Halifax calculates that the 2006/07 IHT threshold of £285,000 would now be £425,000 if it had been increased in line with house price inflation over the past ten years.
House prices have risen by 176% in the past ten years, compared with just an 85% increase in the IHT threshold. At present the inheritance tax threshold is projected to rise very gradually to £325,000 by 2009/10.
70% increase in number of estates worth less than £500,000 paying IHT
Latest figures from the Inland Revenue show that the number of estates with assets of less than £500,000 that pay inheritance tax has increased by 70% from 11,279 to 19,166 over the period 1996/97 to 2002/03, according to the latest available data.
Martin Ellis, Chief Economist at Halifax, said:"Since 1996/97 there has been a sharp increase in the number of estates paying inheritance tax and also the number of properties valued above the inheritance tax threshold. Modest increases in the threshold have lagged well behind the increase in house prices."
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