MARRIED homeowners will find it easier to combine their tax-free allowances to avoid paying inheritance tax on their homes, the Chancellor has revealed. The effective threshold — for spouses and civil partners — will be £600,000 from today, the Pre-Budget Report revealed, at a cost of about £1 billion to the Treasury this year.

The Chancellor also announced that the threshold will rise in 2010 to £700,000. The changes will spare more than 97 per cent of properties from liability to inheritance tax, he said, and will be increased in line with house price inflation in future.

John Riches of the Society of Trust and Estate Practitioners, said: “Widows or widowers and surviving civil partners will benefit because those who have already lost their partner will now be able to make use of their deceased partner’s potentially otherwise wasted allowance.”

Proposals to encourage lenders to provide longer-term fixed-rate mortgages — of 10 or more years — will be unveiled at the Budget next year — and the Chancellor reiterated the Government commitment to increasing the rate of housebilding to 240,000 new homes a year by 2016.

The Chancellor also said that £4 billion had been set aside to be spent over three years, to help improve poor-quality housing. It signalled its intention to bring more homes up to scratch - and more into use. In part, the plans include those to reduce Vat on work to bring properties into use that have remained empty for two years or more — previously three. Vat on such redevelopment will be charged at 5 per cent, rather than 17.5 per cent.

David Ireland, the chief executive of the Empty Homes Agency, said that he believed that the Housing and Planning Delivery Grant, worth £500m to local authorities over three years, would now be extended to apply to reinhabited homes.

Local authorities are under pressure to ensure the Government’s can achieve its stated housebuilding target of 240,000 new homes a year from 2016. Mr Ireland said new rules should allow them to count homes bought back into use among these targets.

About 660,000 homes stand empty at any one time in the UK; of these just under 300,000 have been empty for more than six months. An estimated 150,000 could be bought back into use.

Mr Ireland said: “The biggest reason these homes are empty is state of disrepair and the inability of owners to access the money to reverse this. “In London alone there is an estimated 30,000 homes that could be bought back into use, and 40,000 standing empty above shops. That is potentially 70,000 homes in the capital that would be put to use in a very tight housing market.”

Warren Bright, the chief executive of propertyfinder.com, said “There are over five and a half million occupied homes registered as “non-decent” in the UK. Four fifths of these are privately owned, the rest are social housing.

“It will cost a total of £35 billion to bring them all up to a fit standard. The £4 billion sounds generous but is a drop in the ocean.”

There was no news on stamp duty, with thresholds to remain unchanged. This tax, and the part-introduced home information packs, were two noticeable absences from the Chancellor’s report to Parliament.

Explore Property

• Buying & Selling

• New Homes

• Overseas

• Interiors

• Investment

• Gardens

• Cool In Your Code

• Specials

• First-time buyer

Times recommends

• Second homes: credit crunch casualty or money-spinner?
• How I built my own sliding house
• Top 10 incentives for house buyers