Budget 2010: IHT frozen for four years

Chancellor Alistair Darling has frozen the rate of inheritance tax (IHT) at £325,000 for four years.

The move is to help meet the cost of care for older people, says Darling.

Darling had been widely expected to raise IHT in order to meet the Prime Minister's spending programme.

In December's Pre-Budget Report (PBR), Darling announced he would freeze IHT thresholds for the 2010-11 tax year, with the zero-rate band remaining at £325,000 per person from April (£650,000 for couples). It was due to rise to £350,000.

At the time, Darling said fewer than 3% of estates would pay IHT.

Chris Maddock, head of private clients at accounting, tax and business advisory group Vantis says:"If the Chancellor had raised IHT from 40% to, say, 50% this would only have increased the revenue to the Treasury by £500m.

"Freezing the IHT threshold for the next four years is a far less overt tax rise than raising the actual rate, but with inflation currently at 3%, this will increase the tax take as more taxpayers become ensnared in the longer term."