Government under pressure to increase IHT threshold

The government is coming under increasing pressure to raise the threshold of Inheritance Tax after a week of fierce political debate.

Leading Blairite Stephen Byers resurrected the argument, publicly calling for the abolition of the tax. He was quickly contradicted by trade and industry secretary Alistair Darling, who says an anti-IHT stance doesn’t make a prudent or sensible tax-and-spend policy.

The Conservatives also slammed Byers, accusing him of merely trying to get one over on Gordon Brown. Shadow chancellor George Osborne later said in a radio interview that while the Tories would put economic stability before tax cuts, they would look at ways to ease the burden of IHT.

Rachel Blackmore, spokeswoman for the Building Societies Association, says: “It’s not surprising that IHT is becoming a big political issue as an increasing number of people are being caught by this tax, which used to be the preserve of the rich.

“It will be interesting to see how politicians set up their pitch regarding IHT as any cuts would have to be balanced by rises elsewhere if government spending is to be maintained.”

Jonathan Burridge, managing director of Quantum Mortgage Brokers, says: “IHT was designed to tax the extremely wealthy, but now it taxes the majority, so is unfair. It needs to be reassessed so it targets appropriate individuals.”

Melanie Bien, associate director at Savills Private Finance, doubts any government will abolish this tax as the revenue generated is significant.

She says: “There needs to be more education so people who are just caught out by the tax realise this and plan ahead to minimise the impact.”