Housing boom makes inheritance tax planning more important than ever

At the end of September the Centre for Economics and Business Research (CEBR) revealed that house prices in London are forecast to rise by 43.5 per cent between now and 2018. While forecasts for house price rises elsewhere in the UK aren’t quite at that level, they are still high – the South East can expect increases of 27.7 per cent!

But what does this have to do with inheritance tax? Well, earlier this year the Government announced plans to keep the inheritance tax nil rate band at its current level of £325,000 until at least April 2019. But if houses are going to be worth so much more, it doesn’t take a mathematician to work out that more of your estate will be liable for inheritance tax.

Inheritance tax explained

Inheritance tax is the levy charged on a person’s estate when they die. It is often referred to as a ‘voluntary tax’, because there are measures you can take to reduce your liability.

Without making any preparations you will pay inheritance tax on any property or possessions worth more than the nil rate band (currently frozen at £325,000 until 2019).

For most homeowners inheritance tax is already a real threat, let alone for Londoners who can expect to see house prices almost double over the next five years.

Inheritance tax rates

Inheritance tax is charged at 40 per cent on anything in excess of the threshold, although this could be reduced to 36 per cent if more than 10 per cent of the estate is left to charity.

Preparation is key

As you can see, inheritance tax could make a considerable dent in your estate before it is passed to your loved ones or chosen beneficiaries. However, a bit of careful planning could limit the impact.

You can, for example, make some transfers and gifts that could be exempt from inheritance tax.

Contact us to find out how we could help you plan to reduce your inheritance tax liability.

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