UK House Price Boom Traps Half A Million More In The IHT Net

by Jason Gorringe, Tax-News.com, London

28 July 2004

The continuing rise in UK house prices has left a potential half a million more homeowners liable for inheritance tax in the last six months according to new research.

According to Halifax Financial Services, a total of 2.4 million homeowners could be in line to pay the 40% tax, fuelled by a 20% rise in the average price of a UK house, far exceeding the Treasury’s 3.1% increase in the IHT threshold from £255,000 to £263,000 in April.

The government has frequently been criticised for its minor adjustments to the IHT threshold given the pace of the house price boom in recent years, which has trapped thousands of modestly wealthy homeowners into a tax system designed to ensnare high net worth individuals.

Had the government linked the IHT threshold to house price inflation over the past decade, it would now stand at a level of £359,000, the Halifax stated.

Martin Ellis, chief economist at Halifax, advised homeowners to make plans to ensure that their families are not unduly affected by IHT.

“The government's reluctance to raise the threshold in line with house prices means that more and more ordinary people are now finding that their estate will potentially be subject to inheritance tax,” he warned.

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