Stamp Duty: Brown boost to homeowners is labelled 'disappointing'
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Your support makes all the difference.Gordon Brown offered a sop to homeowners yesterday by raising the thresholds for both stamp duty and inheritance tax (IHT) but still came under attack from the housing industry.
Experts claimed the benefit of the increases would be wiped out by further house price growth and a crackdown on tax planning schemes.
In addition to a previous commitment to increase the value of estates on which IHT is payable to £285,000 from 6 April this year and £300,000 in April 2007, the Chancellor yesterday promised to raise the limit to £312,000 in 2007-08 and £325,000 in 2009.
The latest round of increases in the IHT threshold - which roughly equate to annual rises of 4 per cent a year - are well above Mr Brown's previous inflation-linked increases.
However, Halifax Bank, Britain's biggest mortgage lender, said the increases still failed to reflect the rapid house price inflation of the last 10 years.
Martin Ellis, the chief economist at Halifax, said: "The threshold has simply not kept up with house price inflation, so consequently more and more households are potentially being caught in the net."
Adrian Coles, director-general of the Building Societies Association, said homebuyers would also be disappointed by the Chancellor's decision to raise the stamp duty threshold by just £5,000.
From today, there will be no tax to pay on purchases of property worth £125,000 or less, up from £120,000 previously.
Mr Coles said: "While any increase in the stamp duty threshold helps alleviate pressure on first-time buyers, the fact remains that this tax is ripe for a complete overhaul."
Figures from the Office of the Deputy Prime Minister show the average property bought by a first-time buyer costs £135,742, still well above the stamp duty threshold.
Ray Boulger, of John Charcol, one of the UK's biggest independent mortgage advisers, warned the threshold increase could even be counter-productive. "Most houses that were previously sold at £120,000 to avoid stamp duty will now be sold for prices between £122,000 and £125,000 and many first-time buyers will be out of pocket."
Leading accountants also criticised attempts to crack down on IHT avoidance schemes. While Mr Brown insisted just 6 per cent of estates currently fall into the IHT net, a wave of tax law reforms will dramatically increase the amount of tax paid by certain children's trusts.
In particular, while accumulation and maintenance trusts, set up to provide for the maintenance of children once their parents on grandparents die, are currently exempt from most taxes, the Government is to bring them into line with other trusts, leaving them open to IHT charges.
Patricia Mock, of accountant Deloitte, said: "It appears that favourable treatment will broadly only apply to trusts created upon death by a parent for a minor child who will become fully entitled to the assets at age 18, or to trusts for the disabled."
The chancellor also announced he was considering IHT charges for people who take advantage of next month's pension reforms. Under new rules to be introduced on 6 April, pension savers will no longer have to buy an annuity at age 75 and could potentially leave unused pension fund assets to their heirs.
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