More than 2 million homes come under inheritance tax net: Halifax |
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Sun, 20 Nov 2005 10:05
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LONDON: The number of UK homes coming under the purview of inheritance tax has tripled in the past five years, according to a study by mortgage lender Halifax. At the current level, some 2.1 million homes are liable to pay the tax.
The bank estimates that nearly 12 per cent of all privately-owned homes are worth more than the tax threshold, that is, 275,000 pounds, paying a 40 per cent tax. The threshold is expected to rise to 300,000 pounds in the tax year 2007-2008.
In London and south-east England, more than half the sales are caught in the inheritance net -- wealthy areas such as Kensington & Chelsea (80 per cent) and Westminster (66 per cent). Other areas where the more than 50 per cent properties attract the tax are Hammersmith & Fulham (63 per cent), Camden (59 per cent) and Elmbridge (59 per cent).
The government is to net 3.4 billion pounds this year from inheritance tax, a rise of nearly 1 billion pounds over the last two years.
Critics of the government said this is a sound example of a stealth tax imposed by the Labour government. Shadow chancellor George Osborne said thousands of hard-working families who just happen to live in parts of the country where property is expensive are being penalised.
The government defended its stand saying no previous regimes had ever linked tax thresholds to price increases. A spokesperson for the treasury said: "In the budget, we announced the threshold for inheritance tax would rise by more than indexation this year and in each of the next two years, to 300,000 pounds in April 2007. As a consequence, 6 per cent of estates will pay inheritance tax."
The Halifax study indicated that average house prices are now above the threshold in one in 10 local authorities, compared to one in 50 five years ago. If the government had hiked the tax threshold in line with price rise, the current threshold level should have been 406,000 pounds, Halifax said, adding house prices have risen 164 per cent since 1995 compared with an increase of only 79 per cent in the threshold.
Halifax's chief economist Martin Ellis said: this trend will worsen unless the government acts now and raises the threshold to fully reflect the increase in property prices.
Another study by Grant Thornton had forecast that the number of people whose estates could be subject to the tax is set to rise from 1.6 million in 1999 to 3.6 million by 2009. But, the number of those who actually pay the tax is much smaller, rising from 18,000 to more than 45,000.
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