IHT threshold raised but savers are still deterred

Despite Gordon Brown increasing the Inheritance Tax zero rate threshold to £350,000 by 2010 last week, pundits say by not keeping it in line with inflation he is still deterring savers.

In the Budget, the chancellor, along with shifting the threshold up from £285,000 by 2010, also introduced measures to encourage savings such as increasing the amount of cash that can be saved tax-free in ISAs by 20% to £3,600 in April 2008.

But Angus Macnaughton, director of financial consultancy MI Business Solutions, says: “Of course, Brown’s decision to raise the IHT threshold is encouraging, but until it is raised in line with house price inflation it is penalising too many people.

“It used to only affect the super-rich but is now capturing a far greater proportion of people. It’s at odds with measures he has taken to encourage saving such as increasing the ISA allowance.”

But John Stewart, director of PMI Independent Financial Advisers, says the higher threshold is “excellent”.

He adds: “The problem is the divide between prices in the North and South, but there is no way the government could differentiate on a geographic basis.”