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Over 40,000 estates to be caught by inheritance tax

The City of London remains the most expensive location in Britain with an average house price of £506,724

8 January 2016

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The average UK house price saw an increase of 5.6 per cent in 2015, while the Office for Budget Responsibility has projected that some 40,100 estates will be caught by inheritance tax (IHT).

House prices rose on average to £186,325 according to the UK Land Registry (while Halifax has reported that they have risen by 9.5 per cent to £208,000), pushing the value of family assets well beyond the £325,000 nil rate band.

The main residence additional nil rate band announced in the 2015 budget will not be able to alleviate IHT exposure for another 15 months, as it does not come into effect until April 2017.

Its limited eligibility criteria also mean that it will only be able to reduce IHT exposure for a select few, leaving many (such as those without children) facing a large tax bill.

The think tank, Fabien Society, published a report towards the end of 2015 calling for the abolition of inheritance tax, suggesting that it be replaced by isolated taxes which could be levied against individual classes of assets, rather than the umbrella approach currently taken by IHT.

'Inheritance tax is too toxic to save and should be scrapped entirely. In its place gifts, bequests and other transfers should instead be taxed as income, at the recipient's marginal rate', the report concludes.

The City of London continues to vastly outstrip the rest of Britain as the location for the highest property prices, recording an annual increase of 11.2 per cent to £506,724 for the average property price.

The South Wales county of Merthyr Tydfil has the lowest average property price, as prices experienced a 0.7 per cent drop to £62,437.

 

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Tax & Wealth structuring