Increases in property prices over the last five years have been increasing steadily. In fact, since 2013, the average house price has increased from £167,716 to £232,797; an overall increase of £65,081. A national rise in house prices of 38% has seen houses pay a lot more in inheritance tax over recent years.
Some are critical of HM Revenue and Custom’s failure to take regional housing disparities into account. London, in particular, has seen huge amounts being charged in inheritance tax according to a recent Freedom of Information request obtained by Direct Line.
In 2013, the average price for a London property was £311,364; it is now a staggering £486,304 and a percentage increase of 56% over the five-year period.
The report has found that west London will incur the largest inheritance tax charge at an average of £390,000. 118 estates in the area paid £46 million between 2015 and 2016 which are the latest available figures.
The figures continue to cripple estates in the south of England whilst the North of England, Wales and Scotland remain relatively unaffected by the tax. Only 31 estates in Wigan are liable, 32 in Motherwell, 45 in Wakefield, 55 in Hull and 42 in Falkirk.
In stark contrast, 658 estates in Guildford were liable for an average tax of £231,000 and 585 estates in Brighton are also readying themselves for inheritance tax charges.
Buoyed by rising house prices and an Inheritance Tax threshold of £325,000 which has not moved since 2009, the once tax on the richest estates are now affecting hundreds of mid income households that own property in expensive parts of the country.
The UK collective UK house price increased by £17 billion between 2009 and 2016. Although the government have offered the additional residential nil-rate band of £125,000 for those passing on the family home, this extra money is still struggling to keep up with house rises in real terms. Even though this will increase to £150,000 next year, many estates continue to fall into an inheritance tax charge.
The fact that HMRC raked in £5.2 billion in inheritance tax this year alone, highlights the issue that many families are facing at present. This figure was 60% more than the government received in 2013.
Because of the tangled web of inheritance tax complexities, many are calling for a simplification of the process.
George Bull, Senior Tax Partner at RSM UK, said: “First replace the complex patchwork of thresholds, additional thresholds and nil-rate band with a high, stable threshold for everybody. To get the debate moving, how about £1 million.
Second, replace the single rate of inheritance tax on a deceased person’s estate, currently 40%, with progressive rates.“
Whilst these taxes are vital in supporting the nation’s infrastructure and key services, it should not unfairly impact middle income families just because they live in an area that is more expensive than others.
Are you aware of people affected by inheritance tax because of their location? What should be done to create a fairer system?
