As you are probably aware, the Chancellor yesterday claimed that he is doubling the IHT allowance for married couples from £300,000 to £600,000. This is a classic piece of spin - it is literally true, but utterly misleading, in the same way that a promise not to increase income tax was, literally speaking, adhered to, but ultimately meaningless given that National Insurance was increased.
Previously, the same reduction in IHT could be achieved by simple, standard tax planning - either by a couple electing to be tenants in common of the family home, or by using a trust. All the change does is remove the need to do that bit of planning - for the well-informed it saves the need to pay some professional fees; only for the ill-informed or lazy does it save any tax.
But that is not the point, of course. The important thing to the Chancellor is the headlines immediately after the event. And until 6 o'clock (at least) last night the BBC were reporting that the threshold had been doubled, with no qualification at all. On Sky News it was worse - far worse. At 8 o'clock one of their reporters was doing a piece to camera on the subject. The presented mentioned to him that the Conservatives had pointed out that the rule change made no difference to those who had planned their affairs properly already. The reply from the reporter was that although the Conservatives had made some objections on the detail, what was "for certain" was that half as many people were now subject to IHT before!
This is unbelievable on two grounds. Firstly the accurate objections to the change were just dismissed - because, I suspect, the reporter was out of his comfort zone and didn't really understand them; his piece was not exactly convincing. Secondly, because Sky had someone covering the matter who clearly lacked pretty basic numeracy. Even if Labour had doubled the threshold, what are the chances that half as many people would be exposed to IHT? To put it another way, say 2 million people were liable to pay IHT before, what are the chances that precisely one million have estates worth £300,000 to £600,000, and the other one million have estates worth £600,001 or more? Absolutely unbelievable. Next time, get someone with a grade C in their maths GCSE to cover the pre-budget report, please!
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