Conservative, not radical
Shadow chancellor George Osborne wowed the Conservative Party Conference in Blackpool this week with promises to scrap two of the most hated taxes - at least for some, writes Paul Lewis
First he would raise the threshold of inheritance tax from £300,000 to £1 million. But don't cheer just yet. At the moment about 15 out of 16 people who die pay no inheritance tax. In other words the money and property they leave is worth less than the current limit of £300,000. Of course a lot of people are afraid they - or rather their heirs - will have to pay IHT as the value of their home heads rapidly towards the point at which the tax bites.
But only one in eight properties in the UK is above the IHT threshold (data from Halifax). So seven out of eight people would not have to pay IHT on the value of their home if they died tomorrow. Raising the threshold to £1 million would help the richest eighth whose home is already worth more than £300,000.
And it would be the richest among that richest eighth who would benefit the most. Under the Conservative plans the heirs of someone whose estate was worth £350,000 would save £20,000 Those inheriting from someone with an estate worth £1 million or more would gain £280,000. Someone with an estate of £1.7 million would find their tax bill halved. So the lion’s share of the £3.1 billion cost would go to the millionaires. They would still pay IHT. But a lot less of it.
The Conservatives intend to pay for the change by taxing super-rich people who live here without paying tax. (see my column 'Here but invisible' April 25 2007). But even if that plan works – and many tax experts doubt it will – if a government could raise £3.1 billion from the super-rich would it really want to spend most of it on people who already have £1 million or more?
George Osborne also promised to scrap Stamp Duty for first time buyers on property worth £250,000 or less. Conservatives say that one in three of the homes which sell for under £250,000 are bought by first time buyers. But almost half are already exempt as they are bought for £125,000 or less. The other half would save between £1250 to £2500.
The problem is no-one keeps a record of who is a first time buyer. The Land Registry is a property database not an identity list.
So establishing which of the many thousands of John Smiths had in fact just bought 5 Acacia Avenue and whether that John Smith had ever owned another property would be very difficult. Especially as the Conservatives have also promised to scrap ID cards.
Joined up opposition anyone?
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