Some 12 million married couples and civil partners will be celebrating at the effective doubling of the Inheritance Tax (IHT) threshold from £300,000 to £600,000. A further three million widows and widowers will also be delighted at the Chancellor’s backdated largesse. But the rest of us — singles, divorced husbands or wives — get nothing. Is this fair?
“The change is a recognition of marriage in the tax system, and where marriage is seen as desirable for social reasons, by definition it penalises single people,” says Richard Kirby of solicitors Speechly Bircham. “I do think it is unfair.”
The majority of couples will now be outside the IHT net. The Chancellor has made the current £300,000 IHT nil-rate band allowance transferable between husband and wife and civil partners.
When the first person dies, the allowance can be transferred to the surviving partner, giving an allowance of £600,000, rising to £700,000 by 2010. All widows and widowers whose spouse died before 9 October 2007 can use their deceased partner’s allowance — however long ago their partner died.
'Singles have just as much justification for wanting to pass on their assets'
But divorced and single people have just as much justification for wanting to pass on assets to their beneficiaries — whether those beneficiaries are children, grandchildren or other family and friends. But singles will only be entitled to just one £300,000 IHT allowance.
Even though there is no statutory definition of a widow (or of a widower) they now stand to benefit financially from the death of their spouse. The joke going around some tax experts’ offices is that those with disastrous marriages might now prefer to consider murder over divorce.
Others who have also been left out in the cold include unmarried property owners, such as the two Burdon sisters who have been in the news recently. They are in their eighties and jointly own their house, which is worth an estimated £875,000. On the death of the first sister, the survivor will have to sell their home to meet the IHT bill of about £230,000.
Is it fair that single people are penalised in this way?