In what is likely to be his last Budget, Chancellor Gordon Brown announced today that the Inheritance Tax threshold will increase to £350,000 by 2010.
Tax is currently paid on inherited assets at a rate of 40% above the threshold of £285,000.
The £15,000 rise, claims Brown, will ensure 94% of estates will not be affected by Inheritance Tax.
The threshold set to rise to £300,000 for the 2007-2008 tax year, which stats next month, then it will go up to £312,000 for 2008-2009, £325,000 for 2009-2010 and then a further rise for 2010-2011 bringing the level to £350,000 by 2010 to produce what the Chancellor described as a "fair and targeted system".
But many economists say it is not enough, and argue that the threshold should be relative to house prices.
Carolyn Stepper, director at KPMG said: "This is no change from the current position where 6% of estates pay Inheritance Tax. Since the band has not been increased in line with house prices, we can expect the 94% figure to be optimistic."
And Tim Crawford from the Halifax agreed, saying he had hoped to see the Inheritance Tax threshold adjusted in line with house prices. "The change in the threshold is a move in the right direction but it doesn't go far enough," he said.
Get more information about Inheritance Tax