Londoners to bear the brunt of stealth IHT rises

Londoners are set to bear the brunt of a stealth inheritance tax (IHT) rise announced by the Chancellor in his budget last week because of property values in the capital.

The nil rate band and residence nil rate band were frozen by the Chancellor until 2026. But average prices in London are already higher than the nil rate band of £325k plus the extra £175k residence nil rate band for homes that pass to direct descendants.

And by 2025 average prices in London are forecast to have risen to £548k by estate agents Savills, leaving an IHT liability of at least £19k before any other assets are taken into account.

With average property prices in the South East and East expected to rise to £394k and £362k respectively by 2025, many homeowners in these areas could also leave behind an unexpected tax bill for their loved ones.

Tower Street Finance’s Dicky Davies said: “The stamp duty extension, the guarantee scheme for lenders offering 95 per cent mortgages and a desire for more space after a year of lockdown are all stimulating demand in the housing market and pushing prices higher.

“By freezing IHT thresholds where they are today thousands more families are going to be hit with an IHT bill purely through house price inflation, which is what the Chancellor is banking on to increase the Government receipts from £5.1bn last year to £6.6bn by 2026.

“With more estates liable for IHT we’ll see an increase in people who are struggling to pay the bill, and this is where our Inheritance Tax Loan comes in. We pay the Inland Revenue directly and the loan is repaid from the estate once the Grant of Probate is issued meaning there is no personal liability or risk for the executor.”

Tower Street Finance will be hosting a webinar on April 13 to discuss the benefits of the IHT Loan and how it can help you provide a more holistic service for your clients.

For more information contact info@towerstreetfinance.co.uk or call 0343 504 7100.