Gordon Brown used his 11th and final budget speech today to announce surprise tax cuts that would see UK rates reduced to their lowest level for 75 years. He also announced plans to raise the Inheritance Tax Threshold (IHT) from £285,000 to £350,000 by 2010.
But what does this mean for first time buyers and younger groups trying to make their first step on to the property ladder?
Nicholas Leeming, director of propertyfinder.com comments:
A rise in the inheritance tax threshold to £350,000 by 2010 actually means more homes are likely to fall into the inheritance tax bracket, not fewer as the Chancellor suggested
Since the threshold was last set at £285,000, house prices have already risen a little over 10%. To reach £350,000 in three years, they need rise at only 3.7% per annum, barely more than inflation. Even with this modest increase, 15% of homes will be worth this much in three years’ time. The burden will fall disproportionately on regions with the highest house prices – London and the South East.
High house prices are making it much harder for younger generations to get on the housing ladder. As the Chancellor takes housing wealth from older generations when they die, less money is available through inheritance to help the finances of the younger groups. First-time buyers will therefore suffer too.