New IHT band will exacerbate housing crisis

iht  inheritance tax  on gold...

We all know there is a housing crisis and we all know the reasons for it; soaring prices, lack of building, buy-to-let, and inability to scrape together a deposit.

The government has said it wants to tackle the problem so why has is it planning to introduce a new band of inheritance tax (IHT) that will encourage older people to hoard bricks and mortar and keep the housing market illiquid.

Currently everyone has a nil rate band of £325,000 on which they don't pay 40% but the Tories want to add an additional £175,000 band that can only be applied to your home. This means individuals could pass on a home worth £500,000 tax-free and a couple could pass on a £1 million home IHT-free.

Essential guide to Inheritance Tax

The plan is to no doubt placate the Tory voters in London and the South East who have seen their property value rise above the nil rate band but we should be encouraging older people to stay in their big expensive homes, which is exactly what this policy does.

If you're an older couple who has a £1 million home and you downsize to a £400,000 home, and for arguments sake you put the £600,000 in the bank, the money in the bank is now part of your estate for IHT purposes. Whereas if you'd stayed in your big family home it would be outside of IHT.

So you can see how this policy has the propensity to clog up the property market further. Research by Hometrack has found the average property only changes hands once every 21 years and if you have a tax incentive to stay in your home then that number is likely to rise.

Essential guide to Inheritance Tax

Better changes needed

On top of IHT reform we still have stamp duty hanging over us and despite a big change to the way stamp duty is levied last year, it is still effectively a tax against buying and selling. It is a tax whose main duty is to discourage people from selling their home and buying another one.

Shelter has said 50% more young people will be priced out of property by the end of the parliament, with the number of homeowners aged 25-to-35 reducing from 1.2 million to 616,600 in five years.

So once again, why is this government skewing its policies towards older generations? You could argue that an extra IHT band will mean there is more for younger generation to inherit and yes, that's technically true, but the real question is when will they inherit it?

With people living longer, those 25-to-34 year olds could be in their 60s by the time they inherit the family home, and that is arguably far too late to solve their own personal housing crisis.
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10 PHOTOS
Ten terrible tax excuses
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New IHT band will exacerbate housing crisis

HMRC has revealed the 10 worst excuses people have given for missing the 31 January tax return deadline. The excuses were all used in unsuccessful appeals against penalties for late filling and payment.

Top of the list was “My pet dog ate my tax return…and all the reminders.” It's the school homework classic that never gets old.

One taxpayer argued “I was up a mountain in Wales, and couldn’t find a postbox or get an internet signal.”

It’s not thought that he was up the mountain for the entire ten months - which would indicate a particularly slow ascent.

One person tried to get away without penalties by claiming “I fell in with the wrong crowd.”

Presumably this was some sort of anti-tax, paperwork-eschewing crowd, who ought to take full blame for the fact that you couldn't be bothered to fill in your form.

One of the most fanciful excuses was “I’ve been travelling the world, trying to escape from a foreign intelligence agency.”

It’s an impressive level of excuse, although it might make quite a dull episode of Spooks.

One person tried to claim “Barack Obama is in charge of my finances.”

It would clearly explain why the tax return was late, because Obama has probably been a bit busy recently.

In an excuse which seems to have come directly from ‘My Family and Other Animals’, one taxpayer said: “I’ve been busy looking after a flock of escaped parrots and some fox cubs.”
This taxpayer didn’t bother altering the excuse they usually use at work for missing deadlines and claimed: “A work colleague borrowed my tax return to photocopy it, and didn’t give it back.”

One taxpayer argued “I live in a camper van in a supermarket car park.”

While that could make online submission a bit tricky, it doesn’t fully explain why they weren’t able to complete a paper return or leave the van to find somewhere more suited to paperwork completion. Perhaps the supermarket cafe would have sufficed.

If in doubt, point the finger at your other half.

One person used the brilliant excuse that “My girlfriend’s pregnant”: presumably they weren't to blame for that either.

One person blamed the fact they had been in Australia - where computers and the internet presumably haven’t been invented yet.
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