The majority of property advisors are against including primary residential properties in an estate for inheritance tax (IHT) purposes.
Research from Financial Times Publishing found that 50.5 per cent of advisers believe that a primary property should not be included when calculating IHT liabilities, with 54.6 per cent of respondents stating that more people are being caught by IHT due to property price rises.
In April 2009, the nil-rate band for IHT was fixed at £325,000, which is the level it is still at now. This means that properties worth more than this are subject to 40 per cent tax upon the estate-holder’s death.
Mark Williams, business line manager for IHT with Octopus Investments, told the paper that more and more people are being caught by IHT due to property prices increasing by over 30 per cent since the cut-off was set. If house prices continue to rise as expected, “many more families will be drawn into the IHT net, creating a huge increase in tax receipts for HMRC and making effective IHT planning a much more mainstream financial planning requirement”.
Given the substantial revenue stream that IHT is providing, the Government is unlikely to cut the threshold anytime soon. However, planning as far in advance as possible can give people options when it comes to negotiating IHT.