Please reform inheritance tax, Darling
Inheritance tax has come out top in a survey of the most hated taxes that Brits would like to see reformed in this year’s Budget.
A survey by accountancy firm Maclntyre Hudson found that 82% of taxpayers would like to see the threshold on inheritance tax raised in Alistair Darling’s first Budget on 12 March.
A further 80% of people surveyed want Darling to increase the threshold for higher rate income tax, while 78% want the rate of Stamp Duty lowered and 75% want council tax to be reduced.
Inheritance Tax is payable at 40% on some estates following a death or when the assets are transferred into a discretionary trust or to a company. It only applies on the value of the estate above the nil rate band, currently £300,000 for the 2007/08 tax year.
Although inheritance tax was originally introduced to tax the super-rich, critics say that massive house price inflation mean increasing numbers of middle-income families are being burdened with it. The nil rate band, or threshold for inheritance tax, has increased over the years but not by the same rate that properties in the UK have increased in value.
In last year’s pre-Budget report, Darling changed the rules to allow married couples and those in civil partnerships to combine their £300,000 allowances. This meant that they would not have to pay inheritance tax on the first £600,000 of their estate.
According to Halifax, there are three million properties above the £300,000 threshold and 600,000 above the £600,000 threshold.
Nigel May, tax principle at MacIntyre Hudson, said: “While the majority support the chancellor’s decision to make the inheritance tax allowance transferable between spouses upon death, the support for a higher threshold indicates that Darling needs to go further.”
Last year, the Conservative Party pledged to raise the threshold for inheritance tax so that only properties worth more than £1 million would face a bill.
The MacIntyre Hudson survey also found that 80% of taxpayers think that first-time buyers should be exempt from paying stamp duty. Currently, stamp duty is payable at 1% of the value of any house worth more than £125,000. For properties over £250,000 stamp duty increases to 3%, and for properties over £500,000 it rises to 4%.
The Conservatives have also promised to scrap stamp duty for first-time buyers, and those surveyed want Darling to also introduce this policy.
Which taxes would like to see changed in this year's Budget? Vote now in our online poll.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.