Inheritance tax blow for families as Darling may freeze allowance

By
Kirsty Walker
Last updated at 2:23 PM on 30th November 2009

Alistair Darling: ‘Tough choices’ about halving public debt
Families face being hit by Labour plans to freeze a planned rise in the inheritance tax threshold.
Alistair Darling is said to be considering ditching the policy of lifting people out of the inheritance tax net.
The Chancellor wants to use next week’s pre-budget report to paint a grim picture of severe spending cutbacks over the next four years.
He is said to be determined to leave voters in no doubt about the ‘tough choices’ that need to be taken to meet a target of halving the soaring public deficit.
However, Gordon Brown and ministerial allies such as Ed Balls want Labour to promise to continue to spend more than the Tories, especially in frontline areas such as education and health.
The threshold at which inheritance tax becomes payable is due to rise from £325,000 for a single person to £350,000 from next year.
But Mr Darling is considering freezing it at its current level to help cut the nation’s eye-watering deficit.
This means that the heirs of more - not fewer - householders would be liable to pay the 40 per cent tax if property prices rise. Homeowners with assets worth between £325,000 and £350,000, whose estates would escape the tax net if the threshold is raised next year, would be hit by £10,000.
In its 2007 pre-budget report, Labour promised to raise the threshold progressively to £350,000 for a single person, and £700,000 for a couple, from April next year.

The move came in response to the Conservatives’ pledge to raise this to £1million for a single person and £2million for a couple by the end of their first term in office.
The pledge appeared to single-handedly lift Tory fortunes.

New inheritance tax laws could give families crippling bills if the housing market bounces back
Fearing they had been outmanoeuvred, Labour ministers hit back with their own proposals to reform the tax.
However, the economic crisis has now left the Conservatives struggling to defend a policy which benefits a small number of wealthy people.
Yesterday, the Tories would not be drawn into the row.
Labour figures believe that Mr Darling could defend the move on the grounds that only a small handful of estates would lose out in the short term if the threshold was frozen.
And the move would strengthen Labour’s attacks on the Conservatives as the party of the ’super rich’. Current inheritance tax rules mean that couples can transfer their allowance to their spouses in the event of their deaths.
Options being considered by Mr Darling are also said to include freezing the threshold at £350,000 for several years from next year.
While this would not have much impact if house prices stagnate, thousands of families would face crippling bills if the housing market returned to health. A senior Government source said: ‘These things are under consideration. Inheritance tax is being looked at.’
A leaked ’smarter government’ document claims to have identified £9billion a year in efficiency savings by 2014 through cutting quangos, procurement and back office functions.
It includes plans to reduce the number of senior civil servants, currently 4,300, by 10 per cent.
However, Mr Darling is said to be sceptical that this is enough to prove to voters that Labour is serious about cutting the public deficit.
One Treasury insider said: ‘If, over the next six months, the only thing you put forward is efficiency savings, then you will have a big credibility problem.’
Philip Hammond, Conservative Treasury spokesman, said: ‘At a time when Britain’s economy is crying out for clear and strong leadership, it is nothing short of disgraceful that Gordon Brown and Alistair Darling are so much at loggerheads that they barely speak.
‘The Prime Minister’s reported attempts to massage the Treasury’s economic projections for political reasons threatens to undermine Britain’s credibility and put the recovery at risk.’

Read more

Families pay off record levels of debt as repayments outstrip borrowing

By
Becky Barrow
Last updated at 2:33 PM on 30th November 2009

People are choosing to pay off debt rather than save

Millions of Britons are rushing to pay off their debts in a
desperate battle to repair their personal finances, official figures
revealed today.
The amount of money paid back on overdrafts and loans in October shot to its highest level since records began.The figures, from the Bank of England, mark a massive change for young
people and families who have been living in the red for years.Economists said the longest recession in history is forcing people to
improve the mess that their finances are in, and paltry savings rates
means there is no incentive to build a nest egg.In October, net lending on consumer credit dropped sharply by
£579million, the biggest-ever drop recorded by the Bank since records
began in 1993.Howard Archer, chief UK economist at the consultancy Global Insight,
said: ‘There is an urgent need for many consumers to improve their
balance sheets.’He said ’serious concerns over jobs and the economic outlook’ are also
piling on the pressure for workers to sort out their finances in case
they lose their jobs.It comes as separate figures, from the Building Societies Association,
also published yesterday, show savers emptying their accounts.In October, the amount of money in savings accounts at Britain’s building societies dropped by nearly £930million.Adrian Coles, director general, said: ‘There is little incentive for
people to increase savings while the bank rate remains at its current
low level. Many people may opt to repay debt instead.’Interest rates on savings accounts are so shockingly low at the moment
that it makes no sense to save money if you have debts, financial
experts said yesterday.With rates of up to 29.9 per cent on overdrafts - but as low as 0.05
per cent on savings accounts - people are deciding to raid their
savings to pay off their debts.Michelle Slade, a financial analyst from the financial information firm
Moneyfacts, said: ‘If you’ve got debts, many people are thinking:
‘What’s the point of saving at the moment?”It just doesn’t make sense. ‘Its research shows more than 50 per cent of all savings accounts currently pay a rate of 0.5 per cent or less.Savers have been dubbed the ’sacrificial lambs’ of the Bank of
England’s desperate attempts to rescue the economy by cutting the base
rate to an all-time low of 0.5 per cent.With inflation at 1.5 per cent, millions of savers are losing money
because the interest on their savings is not keeping up with the
increase in the cost of living.Overall, the Bank’s figures show the fall in net lending showed credit
card lending actually increased, up £134million, but it was ‘other’
lending, which is loans and overdrafts, which dropped sharply by
£713million.Mr Archer said the fall is not just about people wanting to pay off
their debts, but also banks and building societies being less willing
to lend.
The Bank’s figures also raised fears about the housing market, fuelling concerns that recent price rises will not last.The number of people buying a property has been increasing for the last
11 months, from 27,294 in November last year to 57,345 in October.Hetal Mehta, senior economic adviser to the Ernst & Young
Item Club, said: ‘Weak lending points to the underlying weakness in the
mortgage market, and suggests that the recent increases in house prices
are unsustainable.’We continue to expect a dip in house prices next year as the market runs out of steam.’Seema Shah, property economist at the consultancy Capital Economics,
said: ‘We doubt that the recent upturn in prices will be sustained.’Property firm Jones Lang LaSalle said it expects average
prices will drop seven per cent next year, which it blamed on rising
unemployment, the General Election and tax rises.

Share this article:

Read more

Lib Dems ask wealthy to bear burden by doubling ‘mansion tax’ on £2million-plus homes

By
Daily Mail Reporter
Last updated at 12:05 PM on 30th November 2009

The Liberal Democrats are to double the rate of their controversial ‘mansion tax‘ but impose it on fewer properties, the party announced today in a damage limitation exercise.Economics spokesman Vince Cable caused uproar, not least among colleagues he failed to consult properly, when he announced the 0.5 per cent levy on all £1 million-plus homes in September.The measure was designed to pay for income tax cuts for most people but raised concerns over the impact on people living in areas with high property prices.Party leader Nick Clegg responded today by saying the value
threshold would be raised to £2 million-plus - taking up to 180,000
homes out of the equation.The remaining 70-80,000 properties
will be hit with a 1 per cent annual levy on the value, which is
calculated to increase the income from the measure by nearly half to
£1.7 billion.According to party figures, the average price of
all the properties which would now face the bill for the income tax
cuts is £4.4 million.Lib Dem leader Nick Clegg said that it was right that people who could afford more should help fund tax breaks for those who need then. Vince Cable, right, came under fire when he announced the policy earlier this yearMr Clegg said it was right that ‘those with the broadest shoulders’ should be asked to foot the bill for tax breaks for people who needed them and said the party’s proposals were ‘the most radical, far reaching tax reform in a generation’.Under the plans, to be detailed at a London event today, the property levy would help pay to take around four million low-paid workers and pensioners out of paying income tax altogether by raising the income tax threshold to £10,000 - also meaning a £700 cut for most workers.The property levy is designed as a temporary measure until the party was able to implement its plans to scrap council tax and replace it with a local income tax.Mr Clegg said: ‘If you want to know how committed a government is to fairness then look at its tax system.’Gordon Brown has created a tax regime that forces some of the lowest earners in society to pay hundreds of pounds in tax they can’t afford, while polluters and rich tax dodgers avoid paying their fair share.’Meanwhile the Conservatives want tax cuts for millionaires, but say there might be tax rises for everyone else.’Under our plans people won’t pay a penny on the first £10,000 they earn. That would put £700 back in the pockets of the vast majority of tax payers, and take millions of people on low pay out of paying income tax altogether.’Our plans represent the most radical, far reaching tax reform in a generation.’They embody everything the Liberal Democrats stand for: fairness; protecting the environment; rewarding hard work.’It is right to ask those with the broadest shoulders to bear a little more of the burden so that millions of people on normal earnings get the break they desperately need.’Mr Cable, normally a favourite among Liberal Democrats, came under fire after some frontbenchers were apparently kept in the dark about the proposal before it was announced at the party’s annual conference in Bournemouth in September.’We’ve had quite a robust argument. We have a democratic party and despite what’s been said I’m not Stalin,’ Mr Cable said in the aftermath of the row.’We could have had more consultation on the detail but we had discussed the broad principle before - it is about making the tax system fairer.’Asked about the change in the mansion tax threshold, Mr Clegg said that what had been agreed in September was ‘the principle’ of the idea.’Both Vince and I launched this plan at our conference,’ he told BBC Radio 4’s Today programme.’Subsequently we’ve looked at it, we’ve refined it, we’ve fleshed it out.’He said the shift would increase the revenue that the new tax would raise, adding: ‘I don’t think what’s interesting is the process by which this policy was arrived at. What is important is, what does this policy do.’Mr Clegg said that the package would leave more money in the pockets of the majority of taxpayers.’It is an impeccably liberal package based on the idea that if you work, if you work hard, if you take initiative, you are rewarded. It does bear down on unearned wealth.’He said the plans were ‘completely different’ to those set out by both the Tories and Labour.’Our approach, our philosophy is completely different,’ he insisted.

Share this article:

Here’s what readers have had to say so far. Why not add your thoughts below,
or debate this issue live on our message boards.

Read more

Cameron may water down plans for married couples’ tax breaks over fears they are unaffordable

By
Kirsty Walker
Last updated at 9:10 AM on 30th November 2009

David Cameron is considering ways to reduce the cost of his pledge to recognise marriage through the tax system
Soaring state deficits could force David Cameron to water down plans for tax breaks for married couples.
The Tory leader has given a cast-iron pledge to recognise marriage
through the tax system in the first term of a government led by him.
His senior colleagues want to allow couples to combine their
tax-free allowances  -  currently £6,475  -  to boost their incomes.
But senior Shadow Cabinet sources say that Mr Cameron is now
considering plans that would benefit only those married couples who
have children.
Treasury figures released last week suggest that allowing all
married couples to transfer their allowances would cost nearly
£5billion and would benefit 41 per cent of husbands and wives.
The figures showed that the tax break would save most money for high earners, making them better off by £2,590 a year.
The tax allowance transfer policy is aimed at encouraging mothers to stay at home and look after children.
Mr Cameron has been careful not to specify how his party would reward marriage through the tax system.
But with the General Election months away, he is coming under
increasing pressure to spell out the details of the flagship policy to
support marriage.

Shadow Chancellor George Osborne is cautious about offering
significant tax cuts at time when he wants to be seen to be focusing on
slashing the deficit.
The proposals were originally costed at £1.4billion, but the Treasury claims the figure is £4.9billion.
Former party leader Ian Duncan Smith will be in charge of Tory social policy if the Tories win power
Senior Tories are also sensitive to the charge that the policy will
benefit the most well off following controversy over their plans to
raise the inheritance tax threshold to £1million.
Opponents have already attacked the prospect of married couples tax
breaks as ‘robbing the poor to pay the rich’ and have claimed they
would fund ‘ladies of leisure’.
They also claim that the policy would discourage women from returning to work after having children.
The proposal to allow married couples to transfer their tax
allowances emerged in a policy document drawn up by former Tory leader
Iain Duncan Smith.
The idea would apply to married couples or gay couples who have
entered into a civil partnership, but not unmarried couples, even if
cohabiting.
Mr Duncan Smith’s ground-breaking recommendations to combat social
breakdown were made in December 2006  -  before the financial crisis
put an unprecedented strain on the public purse.
Mr Cameron has never promised to implement all the proposals.
A Tory spokesman last night said: ‘Nothing has changed. We have promised to recognise marriage in the tax system.’

Share this article:

Read more

It’s Mega Monday as online stores predict £400m shopping bonanza

By
Sean Poulter
Last updated at 3:56 PM on 30th November 2009

A record £400 million is expected to be spent online today as
Christmas shoppers fire Britain’s busiest ever internet sales blitz.The ‘Mega Monday’ figure is predicted to be up by 25per cent on a year
ago as shoppers rebel over the high cost of using the High Street.
Soaring petrol prices and the punishing cost of parking have fueled
the shift to web shopping for gifts this year, it is claimed.
A study published today suggests Christmas parking charges will
add up to a staggering £70million as some greedy councils cash in on
the festive season.Separately, a 15per cent increase in petrol prices will drive up the fuel bill for simply getting to the shops to £8million.
According to the card company, Visa, there will be almost 2.4 million
online sales today which is the highest figure on record. The
busiest period will be around lunchtime with a second peak around 7pm.
Thousands will buy from online stores today in a bid to avoid the high street Books, clothing CDs, DVDs, toys, computer games and consoles top the sales lists with internet stores.
In recent years the Monday closest to the start of December has been
the busiest time for online stores because shoppers can make a
purchase, confident it will arrive in good time.
A Visa survey found 78per cent are planning to do some shopping
online this Christmas. Some 73per cent cited cheaper prices, while
54per cent felt it was speedier than trawling the shops.
A separate survey by accountants Deloitte found 46per cent of people intend to buy more products online this year.
Retail Consulting Partner at Deloitte, Ian Geddes, said: ‘Online
retailing continues to grow at a much faster pace than the overall
retail market. 

‘As recently as 2005, the online market was worth under £9 billion. By
2010 we forecast the market will be worth over £25 billion.
‘The digital age has embedded itself in mainstream life.’
The £25billion figure equates to some 8per cent of total retail sales.
Some 60per cent of shoppers are using the internet more to research
products before purchasing than they did last year, whilst around half
are using price comparison sites more often.
The UK Head of Retail at Deloitte, Tarlok Teji, said:
‘Today, the savvy shopper has information about the product and the
retailer at their fingertips via the internet and mobile devices.
‘A third of consumers tell us they usually research products online
but still buy them in-store.  They are often better informed about the
product than the sales staff themselves.  ’Being online and always connected is a way of life, and this permanent shift in shopping behaviour is set to grow.’
Increasing numbers of shoppers are avoiding the Christmas rush and buying online, according to online retailers and credit card companiesPlay.com believes that both today and next Monday will be particularly busy. It is expecting to process between 1,000 and 1,100 orders per minute.Best-seller predictions include the DVDs of Harry Potter and the Half Blood Prince, Star Trek, the book New Moon by Stephanie Meyer, which comes from the Twilight series, the computer game, Call of Duty- World of Warfare, the Michael McIntyre live DVD and Susan Boyle’s first album I Dreamed A Dream.Figures compiled by the price comparison website uSwitch.com found the high cost of fuel and parking will keep people away from High Streets.AA spokesman, Paul Watters, said: ‘It will be a blow for both shops and shoppers if worries about fuel and parking costs snuff out much of the High Street festive shopping spirit, particularly after such a miserable year.’We have seen cities like Southampton reduce car parking charges to attract more shoppers, but there have also been councils increasing parking charges by 25per cent or more this year to prop up their finances.’Consumer finances are in a very delicate state and a failure to get people to come out and spend in town and city centres at the peak time of year could be disastrous for some retailers.’  A number of High Street stores are running early and significant sales in order to combat these factors and generate takings.John Lewis is considered a bellweather for retailers and has been forced to match the reductions of rivals under its promise of ‘never knowingly undersold’.Yesterday the group reported sales for the past week were up by  22per cent on the same period last year and by 6.5per cent on 2007.Televisions, coffee machines, digital SLR cameras, internet radios, camcorders and e-photo frames all sold well.Sales through its website, that johnlewis.com had a record week, exceeding its previous biggest week by more than £1million.On the High Street, the last Friday or Saturday before Christmas is usually the busiest shopping day. With Christmas falling on a Friday this year,Visa Europe predicts the busiest day will actually be Wednesday, December 23, with over 17 million transactions worth over £860 million.

Share this article:

Read more

Lloyds cuts take job losses past 15,000 mark

The tally of job losses at Lloyds Banking Group rose by a further 373 today
when it announced a fresh wave of cuts in Brighton.

The cuts, described by unions as “alarming”, take the total number
of losses since its takeover of HBOS last year to more than 15,000. Today’s
announcement follow 300 redundancies last week, following a massive shake-up
of its operation in Aylesbury, Buckinghamshire. The redundancies were
particularly brutal, said unions, because the group was the largest private
employer in the town.

Lloyds, which is 43 per cent owned by the British taxpayer, said today it
would shut its Brighton call centre, which employs 535 people, in May next
year. Though 162 of the roles will be redeployed the rest will be lost.

Read more

Investors face huge losses as Dubai abandons debt company

The Government of Dubai said today that it will not stand behind its
wholly-owned subsidiary Dubai World, prompting fears that the company’s
creditors could lose billions of dollars.

Today’s comment, from Abdulrahman al-Saleh, the director general of Dubai’s
Department of Finance, effectively confirms that country does not have
enough money to repay Dubai World’s $60 billion of liabilities. Deloitte,
the accountancy firm, has been called in to restructure the giant business.

Last week, the state-owned conglomerate sought a six-month standstill on
repaying its debts.

Read more

India’s economy beats growth forecasts

India’s economy grew at a far stronger rate than predicted in the second
quarter of the fiscal year as poor farmers weathered a late monsoon, civil
servants enjoyed a pay hike and the service sector boomed.

Policy makers had argued that strong domestic demand and conservative banking
practices would insulate India from an ailing Western economy.

In the three months from July to September those hopes appeared to be
vindicated as figures showed output grew by 7.9 per cent, compared with the
same period a year earlier – much greater than the 6.3 per cent forecast by
analysts.

Read more

UK mortgage approvals hit 19-month high

The number of loans made to homebuyers hit a 19-month high in October,
according to official figures which also showed Britons are paying down
their debts at a record level.

The Bank of England said that mortgage approvals rose to 57,345 in October
from 56,205 in September. The figure represented the highest level since
March 2008 and the eleventh consecutive monthly rise. Year-on-year home loan
approvals were up by 78.5 per cent.

The Bank‘s data also showed that fears about the recession and job losses
prompted consumers to repay a record level of unsecured debt in October.

Read more

Cadbury union warns Kraft may axe jobs

Unite, the union representing Cadbury workers, warned today that a takeover of
the British chocolate company by America’s Kraft Foods could trigger “massive”
job losses among the 6,000-strong UK and Ireland workforce.

The union said it had recently met Kraft executives who had been unable to
give any guarantees that there would be no compulsory redundancies following
its takeover.

Kraft has stated it will keep the Somerdale plant in Keynsham open, which
Cadbury’s management have earmarked for closure early next year.

Read more

Next Page »