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IHT is “ticking timebomb”, says Grant Thornton

The latest figures from HM Revenue & Customs reveal that inheritance tax receipts have leapt by 42 per cent over the last three years, according to business and financial advisers Grant Thornton.

IHT receipts are forecast to total £3.6bn in 2006-2007 up from £2.5bn in 2003-04.
This forty two per cent increase is well ahead of inflation over the same period.
Research from Grant Thornton and Lombard Street Research last year
calculated that 3.6 million people will be liable to pay inheritance tax by 2009 which represented a 70 per cent increase from 2002.
After the Chancellor raised the future IHT thresholds at the Pre-Budget 2005, Grant Thornton calculated this would only relieve the IHT burden slightly and that 3.3 million people would remain liable by 2009 based on its same assumptions.
In future, based on the long term average asset price, the research points to the number of estates above the threshold rising from 2.1 million in 2002 to 3.3 million in 2009. It has been announced that the IHT threshold will be increased to £325,000 in 2010 but this increase is still below the long-term
average growth of asset prices of 7.5 per cent (according to Lombard
Street Research’s calculations). This will continue to increase
the size of the IHT net.

Grant Thornton private client partner Ian Luder says: “IHT is a ticking timebomb. Our research last year forecast how the tax net is set to grow dramatically and now HMRC’s own figures back up our findings. Under the current Government, IHT receipts have more than doubled despite there being no change to the rate of IHT.”

Luder concludes: “It is clear that the IHT burden will rise. Given the recent boom in house price inflation over the past decade, there are many more estates which will be caught in the IHT net in the years to come. Unless it is reformed, IHT will hit middle Britain more punitively and its impact will spread far more widely than just the South of England.”

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