3.5 million Britons to come under inheritance tax net

3.5 million Britons to come under inheritance tax net

	Published : Sun, 06 Nov 2005 11:05 By : Phil Bateman Print this Story

LONDON: Nearly 1.5 million more people in Britain will become liable to pay inheritance tax, according to research by two British firms. In percentage terms, this will mean that there will be a 70 per cent increase in the number of people paying the tax -- from two million in 2002 to an expected 3.5 million in 2009.

The study has been conducted by financial advisors Grant Thornton and economists Lombard Street Research. The researchers are of the view that current inheritance tax threshold of 275,000 pounds is not in line with Britons' growing wealth.

One of the authors of the study, Brian Reading, director of Lombard Street Research, said the number of estates potentially liable to inheritance tax will explode. Although the inheritance tax threshold is set to rise roughly in line with inflation, asset prices, such as shares and house prices, have risen three times faster, he said.

The study revealed that since the Labour government came to power in 1997, the inheritance tax receipts have more than doubled, even when there was no change in the 40 per cent rate. The Inland Revenue has projected an earning of 3.4 billion pounds from inheritance tax in 2005-2006, against 1.68 billion pounds collected in 1997-98.
House prices have gone up by around a 140 per cent compared with a rise in the inheritance tax allowance of less than 30 per cent since 1997.

Grant Thornton's head of private client service, Ian Johnson, said inheritance tax used to be a tax for the very rich, but now it is a growing problem for millions of people with modest estates.

According to government figures 37,000 people are expected to pay inheritance tax during 2005-06, 54 per cent more than the 24,000 who paid it in 2002.

Tax experts say inheritance tax is one of the most penal taxes in the country.

Shadow chancellor George Osborne said the tax has become plainly unfair. It is a particularly insidious form of stealth tax, which is costly to administer and clobbers ordinary people, he said.