An article published yesterday by the Council of Mortgage Lenders (CML) argued that the Government's current fiscal policy is leaving home-owners more than £10 billion a year worse off than they would have been under 1994 arrangements.

CML states that twelve years ago, tax relief on mortgage interest and income support paid to home-owners outweighed their payments of stamp duty and inheritance tax (IHT) to the extent that they were net "gainers" from the Government to the tune of £2.6 billion.

By 2004/2005, however, tax relief on mortgage interest had been abolished and the amount home-owners paid in stamp duty and IHT had risen so steeply that it dwarfed the small amount they received in income support by £7.5 billion.

According to CML therefore, the massively increased tax burden on homeowners is down to the Government's abolition of tax relief on mortgage interest and its failure to index allowances in line with sharp house price inflation.

Although figures on the exact amount of IHT paid on property are not availabe, the CML estimates that the amount of tax paid on residential property left in people's estates has more than doubled in the last 10 years and now accounts for at least 35% of IHT revenue.

CML argues that if the 1997 IHT threshold of £215,000 had been increased to reflect house price inflation, it would now stand at more than £500,000 instead of its current level of £275,000.

It goes on to predict that without a change in policy, there is likely to be a further dramatic rise in the number of estates liable for IHT in the next few years.  One estimate suggests that the number of people potentially liable for IHT could rise by two-thirds to 3.6 million by 2009.

The CML's head of research Bob Pannell also pointed out, "One of the iniquities of inheritance tax is that the Government is taxing growing numbers of home-owners at 40% when they die even when they have never been higher-rate tax-payers during their lifetime."

The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the the UK.

There are currently 11.6 million mortgages in the UK, with loans worth around £942 billion.