Inheritance Act soon to avoid going ‘IHT bust’ as a result of your property.
A WARNING HAS BEEN ISSUED ABOUT INHERITANCE TAXES, as property ownership and growing prices may cause many to go “IHT bust.”
When a person dies, inheritance tax (IHT) is levied on the amount of their estate that exceeds a certain threshold – normally £325,000. The tax, which is fixed at a flat rate of 40%, must be paid to HM Revenue and Customs (HMRC). Some people will understandably be opposed to this type of tax and will wish to take steps now to reduce their burden.
However, British citizens should be mindful that rising property prices may result in a tax issue for those who are left behind.
According to a survey by Tower Street Finance, 45 percent of UK adults expect to sell any property they inherit, while 18 percent want to keep the family house, either to live in or to rent out.
However, with the amount a person can inherit before being taxed capped at £325,000 until 2026, and home prices soaring, complications could arise.
The average home price has risen by £16,000 this year alone, raising fears that Britons could be drawn into the tax net.
At £487,000, the average home in London is already worth more than the personal IHT threshold, and homes in the South East cost an average of £337,000.
There is little indication that the situation will improve by 2025, when both are expected to climb to £584,000 and £394,000, respectively.
This might result in Britons going “IHT bust” almost immediately, even before other aspects of the estate are considered.
Spouses and civil partners are the only people who are completely exempt from IHT on a residence under present laws.
This means that non-married couples, as well as their children, stepchildren, and grandchildren, could all face hefty tax bills.
Regardless, 73 percent of individuals polled by Tower Street Finance claimed that they intend to leave their estate to their children or grandkids.
With no signs of house values falling in the near future, an increasing number of people may find themselves with a tax bill – and a bigger one at that.
“The threshold a person can inherit before the estate becomes liable for IHT has stayed at £325,000 since 2010,” stated Dicky Davies of Tower Street Finance in an exclusive interview with This website.