At the Conservative party conference on October 1, shadow chancellor of the exchequer, George Osborne, proposed raising the inheritance tax threshold to £1 million.
The new measure was presented alongside proposals to abolish stamp duty for first-time buyers and to tax overseas income and gains pf those who are resident, but not domiciled, in the UK.
Inheritance tax is currently payable on estates worth more than £300,000 and has affected many more families recently as a result of higher property prices.
Approximately nine million families would be affected by the change if it became law and the proposal was highly applauded at the conference.
However, critics of the Tory party suggest that the tax – which is expected to contribute around £4 billion to the country’s income for the 2006-07 period – will lead to other tax increases elsewhere.
“While there is no doubt that, coupled with the abolition of stamp duty, these changes would be welcome news for homeowners, they would cost the government approximately £3.5 billion, according to the Conservatives. So how will these lost revenues be funded?” asked Liz Henderson from James Hay’s Technical Unit.
Ms Henderson believes that Mr Osborne’s proposed solution of an Offshore Domicile Levy with a flat rate levy of £25,000 is too simplistic.
“Many non-domiciled individuals will simply have a few bank accounts and perhaps some offshore investments that do not result in significant tax savings, and as a result will be reluctant to register as non-domicile after all,” she said.
“Others will have considerable wealth overseas and a flat rate levy of £25,000 may be a drop in the ocean compared with their overall tax savings,” she added.
The shadow chancellor has been accused of ‘Robin Hood’ tactics, appearing to spare the country’s less wealthy at the expense of the rich in anticipation of a possible approaching election.
Find out more about inheritance tax