Britain faces bigger tax bills

TAX experts have slammed the Budget as a cynical pre-election move that fails to stand up to close scrutiny.

Accountants poring over the small print of the announcements released alongside the Chancellor's 41-minute speech, one of the shortest ever, said today that many of the headline announcements represent 'no real improvement' for taxpayers.

More people will be dragged into higher-rate tax bands as a result of Gordon Brown's failure to increase personal allowances and income tax bands by just the rate of inflation. Economists call this 'fiscal drag', says Mike Warburton, partner at the accountants Grant Thornton.

'As ever with the Budget, the devil is in the detail,' said Warburton. 'All these initiatives may appear positive news, but many fail to stand up to close scrutiny.'

The Chancellor's failure to push through a substantial increase in the inheritance tax threshold means many middle-earning households will be caught by the tax net simply because the value of their homes have increased considerably.

The number of estates paying IHT has more than doubled over the period that Labour has been in power and is still increasing despite the Chancellor raising the threshold above inflation. The estimated number of IHT taxpayers in 2005-06 is 37,000, whereas when Labour came to power it was only 18,000.

Charlotte Black of the stockbrokers Brewin Dolphin said the lift in IHT thresholds announced by Brown went some way but not far enough. She added: 'While we welcome the Government's decision to raise the inheritance tax threshold to £300,000 over three years, it still falls a long way short of the £450,000 IHT free threshold for which we have been campaigning.'

Warburton agreed, adding: 'The Chancellor has raised the inheritance nil-rate band barely above the rate of inflation, and this in no way accounts for the massive rise in house prices over the last few years.

'Since 1997, house prices have increased by a national average of 139%. If Brown were to use this rate to increase the IHT nil-rate band, the threshold would now stand at approximately £515,000, which would alleviate worry and hardship for thousands of people.'

Warburton was particularly critical of the new starting threshold of £120,000 for Stamp Duty. He declared: 'The starting threshold of £60,000 for Stamp Duty came into effect in 1993 and Gordon Brown failed to change it throughout the housing boom of the last few years.

'Doubling it just weeks before a general election is a cynical move to court votes, but it won't help the majority of home buyers, particularly those in the South East.'