Average London House Price Attracts Death Duties

New figures have revealed that average house prices in 18 of 32 council areas have topped £325,000, making them susceptible to inheritance tax (IHT). It is no longer just the very wealthy who are affected by this tax and it’s becoming increasingly important, particularly for homeowners in London and the South-East, to take action to reduce their liability.

Property prices in Hounslow, for example, are expected to exceed £325,000 by next year if they continue to rise at their current rate. A recent survey also indicated that 250,000 pensioners in London are living in homes worth more than £325,000. If you have concerns over how rising house prices may have impacted on your estate and inheritance plans, speak to a solicitor.

PM would like to raise IHT threshold to £1m

The Prime Minister has said he wants to raise the £325,000 inheritance tax threshold from £325,000 per person to £1m, but has not specified when or how. It is believed that the Liberal Democrats in the Coalition Government have applied pressure on David Cameron not to carry this initiative through.

The rate at which the tax is currently levied above the threshold is 40%. Couples who are married or are in a civil partnership can double their tax-free allowance to £650,000. As more and more estates now fall within this range, people are exploring ways of mitigating the liability. Many have given away cash and even their homes to family members. For this to successfully remove the property from the donor’s estate, they will need to survive seven years after making the gift. Until the seven years are up, the gift is only “potentially exempt”, and IHT will apply.

Careful planning and legal advice is essential. Nearly two-thirds of Britons do not even have a will. If you still haven’t finalised your last wishes or would like to write a new will, want to leave money in trust for a young relative, or are struggling with probate issues, call us on 01494 790002. Alternatively, email us at estatemanagement@ibblaw.co.uk.

Some countries have scrapped death duties altogether

The UK’s inheritance tax threshold of £325,000 is the second highest in the developed world, only behind Ireland, according to a recent global study. The threshold for death duties in the United States is £3.2m, and the level has risen more than threefold in the last decade.

Respected think-tank Institute of Fiscal Studies (IFS), earlier this month, proposed that IHT be abolished completely. "It would simplify the tax system and get rid of an ineffective and unpopular tax which can be criticised in any case as a source of double taxation in cases where bequests are financed from earnings that have already been taxed,” explained the IFS. Several developed countries, including Australia, Israel and New Zealand have scrapped death duties altogether.

For advice on issues relating to wills, trusts, probate and tax and estate planning, contact an expert wills and probate solicitor by calling us on 01494 790002 or email us at estatemanagement@ibblaw.co.uk.