Labour inheritance tax benefit for married people

[jackstarbright]

Not a joke sorry.

In 2007 Alistair Darling raised the inheritance tax threshold for married people. here. Up to £700k now (I think). Unmarried people (including lone parents) pay tax on estates over £350k of course!

That's it - just surpised nobody mentioned it in all the marriage tax benefit / inheritance tax debates.

The IHT discussion was played out as 'a tax break for millionaires' but that was misleading.

As recently as 1996 the IHT threshold meant that only 1 in 40 households were liable. By 2007 it was about 1 in 5. Reason being that the rise in average house-prices (the bulk of what most ordinary people leave in their wills) has been much higher than the rise in the threshold every year. So Darling raising the threshold (and the Conservative pledge to do the same) is to keep it as something paid by the wealthy rather than the ordinary.

The genuinely rich don't tend to pay IHT because they can afford accountants to set up trust funds etc., and dodge it. Married people (unless they happen to die at the same time) have always been able to pass on their estate to the surviving partner without paying IHT.

Thanks Chil1234. I never understood Gordon Brown's claim that the Tory increase in threshold benefited ''4,000 of the richest estates by £200k each'. Currently an estate valued at £750k is liable for £200k IHT.

I agree very rich (and older) people can avoid it, whereas younger unprepared people pay it and they are more likely to have dependents who suffer.

Thanks to good old Alistair it seems, that married folks like me are fine anyway.

It's one of the many reasons why Civil Partnerships were welcomed, incidentally. Cohabiting couples, should one of them die, are liable for 40% IHT on everything their partner leaves them above £325,000. So you had the situation where the surviving partner was selling off their own home just to pay the IHT.

GB's claim is correct, of course. But the part he misses out is that by having the threshold at £325,000 3-4 million other households are in the IHT bracket.

If anyone would like to try this one out... tot up the value of your home & add on any life-insurance and savings. When the average house price today is about £160,000 it's surprisingly easy to hit £325,000 even if you wouldn't class yourself as particularly wealthy.