More people dragged into the inheritance tax net
On previous occasions, we have covered the area of more and more families being drawn into the inheritance tax net. This number appears to be continually increasing and as a result there is a knock on effect on those liable to Stamp Duty.
Research by the Office for National Statistics showed that property prices soared by 11.7% in the year to July – which is the steepest increase since before the recession.
With the value of property, it makes a difference where you live, of course. The price of an average house price in the South East is around £337,000 compared with £246,000 in the South West. Prices in the Midlands and North tend to be lower, whereas London prices come in at a staggering average of £514,000.
This means that families living in the South East and London are now almost certain to be dragged into the inheritance tax trap given that the main asset (the family home) could be close to, or above, the inheritance tax threshold of £325,000.
This is because inheritance tax is charged on all the assets that someone owns, so the family home is just the start. Then you have to add on the personal possessions, investments, cash deposits and everything else.
So don’t think you will escape inheritance tax, just because your house is worth less than £325,000.
In addition, a house purchase above £250,000 will be subject to Stamp Duty at 3%. As a result of the increase in property prices, the cost of a starter home has also soared – with not only the house being more expensive but the cost of Stamp Duty also being added in.
According to the statistics the average first-time buyer’s home in July this year cost £209,000 – which is approximately £27,000 more than the previous year. No wonder the kids might need help with their deposit!
By maximising use of planning strategies – whether by carrying out estate planning to reduce inheritance tax on death or gifting to help children and grandchildren climb the property ladder, the fiscal challenges can be addressed.
However, HMRC has successfully closed most of the main planning opportunities with the family home and homeowners looking to do something about a potential inheritance tax liability might need to look at other arrangements.
It is a complex area, so professional advice is invaluable. If you would like to discuss any of these issues and make use of our expertise, please let us know.
Kind regards, Paul Hoskin.
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