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Will the UK property boom lead to more families becoming inheritance bust?

Richard Dearden
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Richard Dearden
Will the UK property boom lead to more families becoming inheritance bust?

With soaring property prices pushing many more estates into inheritance tax (IHT) liability it’s predicted that few loved ones will now want to be left a legacy of bricks and mortar.

A recent survey by inheritance lending specialist Tower Street Finance revealed that 45 per cent of UK adults plan to sell any property they inherit. A further 18 per cent say they will keep the family home and either live in it themselves or use it to provide a rental income.

But with the threshold a person can inherit before tax remaining frozen until 2026 at £325,000 and property prices continuing to rise, with the average home increasing in value by £16,000 this year alone (1), it is unlikely that loved ones will want to be left the financial burden of inheriting the family home at all.

Spouses and civil partners are the only family members completely exempt from IHT on a home. Despite this, 73 per cent of the 2,000 UK adults asked in this study said they planned to leave their estate to their children, stepchildren and grandchildren.

Dicky Davies of Tower Street Finance comments: “The threshold a person can inherit before the estate becomes liable for IHT has remained at £325,000 since 2010, but property prices have surged with the average family home increasing in value by 53 per cent since 2009 (1).

“We already know that each year 2,000 families can’t afford the average up front IHT bill of around £200,000 and with property prices continuing to climb the number of loved ones in this position will only further increase.”

The average property in London is already valued over the personal IHT threshold at £487k, as are homes in the South East currently costing an average of £337k. Both are predicted to rise to £548k and £394k respectively by 2025.

Forecasts for properties in the East of England will also exceed the IHT threshold by 2025 with the average home expected to rise from £310k to £363k (2), and this is before any other assets in the estate are accounted for.

Dicky Davies adds: “It’s a sad fact that for some family members being left a property will become a financial millstone around their necks because IHT thresholds haven’t moved in over a decade. This is one of the reasons we created our unique IHT Loan product.”

The IHT Loan is for executors and is paid directly to HMRC to settle the tax bill. It requires no credit checks, no charge over property, no personal liability, no monthly repayments and has a fixed monthly interest rate.


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