Rising house prices have helped push up the number of households paying inheritance tax and are creating new IHT hotspots around the country.
In the latest HMRC data released today, many constituencies saw a rise in the number of households paying IHT1and the report estimates total IHT income at £3.417bn for last tax year (up 8.6% from £3.147bn).
The North-South divide is clear, illustrated by the fact that the number of people paying IHT in Harrow and the surrounding Ruislip & Uxbridge London, is roughly the same as those paying the tax in the whole of the North East of England.2 Similarly, the constituency of Richmond Park, London has more IHT payers than all of Birmingham.
HMRC also stated that the ongoing rise in property prices had contributed to the increase in overall tax take. Based on this fact and combined with analysis of the Land Registry house price rises in these areas, NFU Mutual has predicted the areas that could see significant increases in IHT collection in the future.3
The insurance, investments and pension provider named the likes of Maidenhead, Putney and Beckenham as such locations facing potentially greater IHT bills in the future.
These will join existing IHT hotspots, where the most estates currently pay IHT, including Richmond Park (London), Chichester (Surrey) and Beaconsfield (Bucks). Interestingly, of the top 10 peak IHT areas, six are now in London (up from three in the year previous), reflecting the huge house price rises seen in the capital over the last few years.
Research carried out in conjunction with the analysis also suggests that most people are unprepared for dealing with IHT – with just one in four consumers (24%) knowing the basics - that the threshold is £325,000 and tax rate on anything over this 40%. 4
Commenting on the findings, Stephen Berry, personal finance specialist at NFU Mutual, said:
“Over the past two decades inheritance tax has gone from being an issue for the super-wealthy to something that affects millions of people – driven largely by the rise in house process.
“Although some people aren’t too concerned that the government will take a large chunk from their estate when they die, many would far prefer that as much as possible goes to their children instead.
“There are many simple steps people can take to make sure their loved ones don’t pay any more tax than they have to – but they shouldn’t wait until it’s too late. Planning should start in your 50s, perhaps even earlier if your health or wealth is a big enough concern.”
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