Many estates could be entitled to significant inheritance tax rebates if the property market continues to contract and property prices continue to fall.
The economy is worrying for many as political uncertainty continues to destabilise many business sectors including the property market. Whilst this is a worrying time for sellers that may be forced to sell their properties for less than they may have been worth a year ago, for executors, house prices could have a huge impact on the overall inheritance tax an estates is liable to pay.
According to research into the recent House Price Index by the Office for National Statistics, conducted by NFU Mutual, house prices for many areas of England fell by 0.9% in the year to July 2019.
London, South East, South West and the East of England are all areas of the UK property market in decline with the average london property value falling by 1.4% and those in the South East suffering a 2% property reduction in the past year.
NFU Mutual have implored executors that may find themselves selling the property of the deceased for a lower value within four years of the death to ensure they reclaim the tax paid on the loss by completing an IHT38 form.
Following a decade of consistently rising house prices and favourable pension schemes, around 1 million people aged over 60-years are teetering on the precipice of an Inheritance Tax (IHT) black hole.
Unbeknown to the estate owners, increasing equity in property has left a mass of people on the brink of IHT liabilities.
Whilst the government predict that the number is loitering around £1 million people, NFU Mutual have speculated this figure is closer to 1.4 million UK estates valued at somewhere close to or in excess of the current threshold of £325,000.
As prices contract in the current climate, many estates should ensure they reclaim additional inheritance tax paid.
Sean McCann, chartered financial planner at financial advice firm NFU Mutual, said:
“Many families are missing out and paying more inheritance tax than they need to.
“When property prices and share values fall, rebates are not given automatically and need to be proactively claimed.
“Those that opt for DIY probate are not always aware that IHT can be reclaimed in this way.
“What’s more, with over half of all estates paying IHT falling in London and the South East, those living in and around the capital, where house price falls have been the most dramatic, should ensure they don’t miss out on any potential rebates due.”
