Wednesday 15th August 2007
House price inflation and growing personal wealth mean that more and more people are being hit by inheritance tax, according to financial research company Defaqto.
According to research by Scottish Widows, 9.4 million individuals can expect to have an inheritance tax liability by the time they die - currently UK residents are liable to pay inheritance tax at 40 per cent on their total assets, including the value of property worth over £300,000.
The Office of National Statistics estimates that 4.8 million Brits have homes worth more than £300,000 and that another 4.5 million are liable to pay the tax when their personal wealth is taken into account.
Kate Marsden, marketing director at Defaqto, said: "As UK house prices continue to outstrip rises in the inheritance tax threshold, more and more households are falling into the inheritance tax net.
"Advance tax planning is essential if individuals bequeathing assets to their heirs want to reduce the potential inheritance tax bill their beneficiaries will face. Writing a will is a good place to start."
The tax has been criticised by many as unfair, because while the threshold changes in line with inflation, it has not been adjusted to keep up with the growth in house prices, which means in real terms, the threshold is being lowered.
Had the inheritance tax threshold increased in line with property price inflation since 1997, it would now stand at £513,850, according to Land Registry figures.
However, inheritance tax is known by many as 'the voluntary tax,' because there are ways to avoid it, including making gifts to family and friends, giving donations to charities, political parties and national institutions and equity release.
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Tax
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