Experts Warn Of Inheritance Tax 'Time-Bomb' In United Kingdom

by Jason Gorringe, Tax-News.com, London

14 May 2002

Tax experts have warned of a looming inheritance tax crisis if UK house prices continue to increase at the same rate.

The country's biggest mortgage lender, Halifax, revealed last week that its house price index for last month was up 15% on April 2001 figures, and according to a report in the Financial Times on Saturday, house prices in certain areas of the UK such as the South East have almost doubled in the last five years.

Figures released by the Land Registry recently have supported this assertion, revealing that on average, house prices have increased by around 20% during the past year.

However, the threshold for inheritance tax - below which heirs pay no tax on property and assets following the death of the householder - has not kept pace, prompting the Chartered Institute of Taxation to urge home-owners to rethink their tax affairs:

'If you take London and the South East, it noticeable that whereas house prices have gone up by 100% in the last five years, the Inheritance Tax threshold has only gone up 16%,' CIOT President John Whiting said in a statement last week.

According to the Financial Times, the IHT threshold has risen just 25% since 1996, currently standing at £250,000. If the property market continues to grow at the same rate as it has done of recent years, thousands of average households could face significant IHT bills in the future, Mr Whiting warned.

'Most people assume that IHT doesn't apply to them, but very soon the average house owner will be paying IHT,' he predicted, grimly likening the issue to a 'time bomb'.

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