Darling chancellor recently scrapped plans to raise the threshold for inheritance tax(IHT) from £325, 000 to £350, 000 as he looked for to place obvious distance in between Labour and the Conservatives on the issue of wealth and aspiration.

In 2007, ministers promised to increase your threshold progressively in order that by April 2010 a single man would depart an estate of £350, 000 and a couple £700, 000 prior to their beneficiaries faced a tax bill.

This was in response to a Conservative proposal to raise it to £1m, which gave the party’s fortunes a major boost in 2007.

But Alistair Darling mentioned his announcement in relation to allowances rising to reflect inflation and anticipated continued house rate growth had been built “earlier than the financial crisis rocked the world-wide economy”.

“I do not feel that raising this inheritance tax allowance will be a priority, given the effect of the downturn on the country’s monetary resource. Therefore I have resolved to freeze the individual allowance at £325, 000 for the next 12 months, ” he pronounced.

Just 2. 5% of estates were likely to pay IHT in 2009- 10, the Treasury said.

The chancellor’s move to freeze the inheritance tax allowance had been anticipated by a lot of commentators, who think an attack on the Conservatives’ plans is likely to be central to a Labour party’s general election struggle.

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In October it emerged there had been a dramatic fall in the number of people paying IHT, with officials predicting that 12, 000 households would pay up death duties this year – the lowest since records commenced in the late 1930s.

Figures produced through HM Revenue& Customs demonstrated that the current government had presided more than the biggest decline in inheritance tax payers.

The number of estates whose worth takes them above the £325, 000 inheritance tax threshold is expected to lower by 25 % during this tax season.

Analysts say the decrease is a result of dropping house prices, share market correction, and the 2007 move to allow married couples along with civil partners to transfer unused IHT allowance from a departed wife or husband to the surviving partner. The tax can be charged at 40% on every one assets worth more than £325, 000, though anything left to a spouse or civil partner can be exempt.

Nicola Plant, a partner in the private customer team at law firm Thomas Eggar, said that with the country still in recession along with an election looming it was no great surprise that the chancellor had seen fit to freeze the inheritance tax threshold.

” If home prices continue stable next year then the impact of freezing the IHT threshold will be minimal. this may prove to be a clever move by Darling, but not an effective fical decision approach. Labour can be viewed to be carrying out the best thing and at the same time basically upsetting as few potential voters as possible, “she said.

The government also announced additional action on closing down schemes which have been used to sidestep inheritance tax by means of the use of trusts into which houses have been transferred.

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