Brown's stamp duty and inheritance tax sops fail to enthuse housing industry |
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Fri, 24 Mar 2006 00:25
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LONDON - Gordon Brown's budget had some good news for homeowners yesterday as the Chancellor raised the bar for both stamp duty and inheritance tax (IHT). However, this step failed to enthuse the housing industry, which felt that the accrued benefits from these sops would be erased as house prices continue to increase and tax-planning schemes become defunct.
Brown raised the threshold for estates under the inheritance tax net to £285,000 and £300,000 in April 2007. He also pledged to further hike this to £312,000 in 2007-08 and £325,000 in 2009. These increases are considerably higher than Brown's previous inflation-linked increases.
But analysts say this still fails to take into account the house price inflation over the last decade, "The threshold has simply not kept up with house price inflation, so consequently more and more households are potentially being caught in the net," said Martin Ellis, the chief economist at Halifax Bank, the nation's biggest mortgage lender.
Even Simon Philip, a private client partner at Deloitte felt that Brown could have raised the limit a little more, “The continuation of above-inflation increases in the nil rate band will be welcomed, as many who would not regard themselves as wealthy will no longer pay IHT," he said. “The chancellor could have been more generous given the relatively small amounts raised by this tax, and perhaps there is scope for increasing the nil rate band more quickly in future.”
The Association of Certified Chartered Accountants (ACCA) echoed his sentiments and said the relatively minimal increase in thresholds was not at all feasible since it would "actually pull thousands more people into paying inheritance tax, since house price inflation is running at a much higher level than the overall inflation rate, and this allowance will not keep pace," according to the association's head of tax, Chas Roy-Chowdhury.
As far as stamp duty was concerned, Brown has raised the limit by just £5,000 from £120,000 to £125,000, although the figures from the ODPM show that the average house price in the country is £135,742. "Most houses that were previously sold at £120,000 to avoid stamp duty will now be sold for prices between £122,000 and £125,000 and many first-time buyers will be out of pocket," said Ray Boulger, of John Charcol.
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