On Wednesday of this week the Chancellor of the Exchequer presented his spring 2006 Budget to the House of Commons, and for Britain’s home-owners there were two areas of real disappointment.

The threshold for Inheritance Tax is to go up, but only to £325,000 (from the current level of £275,000), and will only reach the new level in 2010. The number of homes which are worth more than the current threshold for Inheritance Tax has almost tripled in the last five years, which means 2.1 million homes are now liable for the tax. This represents approximately one in eight of all homes in Britain.

The threshold has risen by just 35% since the present government came to power in 1997, while the cost of the average home has gone up by nearly 300%. The amount raised by this tax has more than doubled over the same period – from £1.6 billion to £3.4 billion. If the threshold had shadowed house values it would now stand at more than £400,000. The Chancellor’s level of increase will do nothing to reduce these figures bearing in mind that house prices are still rising in most parts of the country.

James Laing of property specialists Strutt & Parker comments, “IHT is a tax on house price inflation unless the Chancellor moves the threshold by a serious amount. This adjustment is far too little and is very disappointing. An ever increasing number of home-owners are going to be paying IHT in the future; what used to be a tax paid by the very wealthy will soon by paid by a large number of people.”

The threshold beyond which home-buyers will have to pay Stamp Duty on their purchase goes up to £125,000, which is a very modest rise from the current level of £120,000 (raised from £60,000 last year).

Mr Laing commented, “This does seem to be a tax on home ownership, and there are very definite anomalies. In many parts of the country, such as London and the South East, where house prices are higher, a far higher proportion of young people wanting to get on the property ladder have to pay Stamp Duty than in other regions. There is a very pertinent issue about workers in key industries, such as police officers, fire fighters and medical staff being unable to afford to buy homes in the South East. The lack of worthwhile movement on Stamp Duty will make life harder for them.”

One other point that raised eyebrows, though not directly associated with the property market, is the increase in Vehicle Excise Duty for larger-engined cars such as 4x4s. The highest band is now £210 per annum. The media has spoken at length about ‘Chelsea tractors’ and 4x4s being used in the suburbs for the school run, but of course there are large numbers of such vehicles in use in rural areas, where they are indispensable tools. James Laing adds, ‘A metropolitan view has prevailed here, at the expense of the countryside. Many country people really need 4x4s and the increase in taxation will be most unwelcome. For some of the more hard-pressed parts of the farming community this will be yet another load to bear’.