INHERITANCE tax is now a “mass market” levy set to be paid by millions of homeowners as property prices soar, experts have warned.
An open safe with nothing but a sticky note with 'Inheritance Tax' scrawled on it[GETTY]Currently the taxman claims 40 per cent of anything over the current tax threshold of £325,000 on the death of the property owner.
But with the value of the average London home set to breach that level next year, followed by homes in the South-east in 2019, many people will become higher rate property taxpayers.
The price of a typical London home will hit £331,000 in 2015, according to a study by capital investors Albion Ventures.
Across the country, ordinary homeowners could see their property cross the IHT threshold by 2025, saddling them with huge bills for a tax designed for the very wealthy.
A property worth £425,000 would leave families facing a £40,000 tax bill.
The report comes as average property prices continue to rise while the IHT threshold has remained fixed for the fourth year running at £325,000.
From 1986, the threshold rose by an average of 5.4 per cent a year – but it has remained at £325,000 since the 2010-11 tax year and it will remain frozen until April 2019.
It’s no longer 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
House prices have jumped 7.5 per cent across the UK and by 15.4 per cent in London.
Had IHT continued to rise at the average pace, it would currently stand at £423,212. The study will be seized upon by critics and seen as a vindication of the Daily Express’s crusade to scrap it.
At the 2010 election, the Tories promised to raise the threshold to £1million. But it was dropped in talks with the Lib-Dems. A recent study by the Institute of Fiscal Studies said the number of estates liable to IHT would quadruple from 2.6 per cent in 2009-10 to 10 per cent by 2018-19.
By then the Government’s IHT tax take is projected to hit £5.8billion – a bigger share of the national income than at any time in the last 45 years.Albion’s report reveals big regional variations. An average home in the South-west is forecast to cross the threshold by 2023, while in Scotland and Northern Ireland it may take until 2036 and 2042.
Patrick Reeve, of Albion Ventures, said: “It’s no longer 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.”
According to the Land Registry, the number of properties sold over the IHT threshold rose by 2.4 per cent last year to 114,721.
Matthew Wyles, of mortgage group Castle Trust, said: “IHT is now a mass market tax and ordinary people in ordinary homes need to start thinking about it.”
David Cameron has hinted that raising the threshold to £1million will be included in the Tory election manifesto.
The Treasury said: “Despite rises in property values in recent years only five per cent of estates were liable to pay inheritance tax in 2014-15.”
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