Inheritance Tax Not Just For The Rich As Rising House Prices Fuel HMRC’s Growing Tax Cut

The days of inheritance tax affecting only the super-rich are long over as latest figures by HMRC show that the Government raked in £5.3bn in inheritance tax receipts from April – December 2022, largely fueled by rising house prices. 

This means that inheritance tax (IHT) is set to become an increasingly big earner for HMRC over the coming years. Research conducted by Wealth Club shows that while the average IHT bill was £216,000 in 2019-20, it could climb as high as £304,567 by 2025-26 and £345,084 by 2027-28. 

Although house prices are currently falling in some areas following a post-COVID boom in the housing market, at an average of £295,000 they are still far higher than they were pre-pandemic, with the average being significantly higher in areas like London. With the Government announcing in their Autumn budget last November that the IHT threshold of £325,000 will remain frozen until April 2028, an increasing number of ‘average’ people will be hit by an IHT bill in the coming years. This is because this tax-free threshold has remained static since 2010-2011, when the average UK house price was much lower, at around £170,00. What was once a £155,000 margin between the average value of an inherited property and the IHT threshold has reduced to just £30,000. 

While in theory this still means that most UK homes remain under the IHT threshold, the average property prices in cities such as London, Bristol and Edinburgh are over the £325,000 threshold. With that in mind, it’s easy to see how an increasing number of ‘average’ people who would previously have been previously unaffected by IHT will be faced with an inheritance tax bill over the coming years as the value of their inherited estate exceeds their tax-free allowance. 

Dicky Davies, Business Development Director and co-founder of Tower Street Finance said: “Though it may once have been considered a tax on the wealthy elite, the combination of frozen allowances and rising house prices means that an increasing number of families will find themselves facing an inheritance tax bill they may have been unprepared for. 

“For people in this situation, it’s important to seek advice on how to best manage their finances. With a suitable solution in place, they can help ensure that their IHT obligations are met and unlock their inheritance.” 

Tower Street Finance are the experts in probate lending, with solutions that can help settle an IHT bill. Find out more about our Inheritance Tax Loan product, or call us on 0343 504 7100.