Currently if an estate’s value exceeds £325,000, 40% of the value will immediately go to the taxman when the owner dies (although marriage doubles that threshold to £650,000). Recent research undertaken by Saga shows that the number of houses sold for more than £325,000 has been higher during the first 7 months of 2016 than it has ever been.
Sags’s study included 105 postcodes across England and Wales. Its results concluded that during 2015 nearly a quarter of all houses sold within those postcodes were sold for more than £325,000. However, from January to September 2016, that figure has crept up to 26% which means 1 in 4 houses sold would not be eligible for the nil-rate tax band.
Predictably London leads the way. In central London 82% of properties were sold for more than £325,000, a rise of 6% on 2015 although property experts have claimed there the number and value of sales sped up in advance of the Chancellor’s announcement that he was to raise stamp duty on residential properties which could explain some of the increase.
In north London the proportion of +£325,000 sales rose from While north London has seen a bigger jump from 76% to 83% and, in the Home Counties, prices in St Albans rose nearly 10% in the same period.
There has also been an albeit smaller rise in the number of houses sold for more than £650,000. In total the figure rose from 5.4% of sales 5.8%. While this looks like a minor adjustment on the surface, when you compare it to the fact the proportion of properties sold from more than £625,000 in 2009 was only 2.4%, it puts the trend into clearer perspective.
According to the research, all of this means that the total sum recouped from Inheritance Tax (IHT) does indeed appear as though it’s heading for a record high. However it can’t be forgotten that in 2017, the threshold will change and an individual will be able to pass on £425,000 to their heirs without paying IHT as long as that £425,000 estate includes their main residence. By extension that means that in 6 months a married couple could pass on as much as £850,000.
Although this will provide a little welcome relief for owners and heirs, the fact of the matter is as long as house values continue to rise, tax becomes a concern for everyone and not just the wealthy.