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More people being caught by IHT due to rising house prices

3rd October 2007 Print
The average detached house price in Greater London is now £588,604. It is therefore easy to see why the Conservatives feel that this tax is unfair and why they are advocating that the threshold should be increased from £300,000 to £1,000,000. In 2001-2002, the Revenue collected £2.35 billion in IHT and the projected figure for 2007-2008 is around £4 billion.

Where the value of an individual's estate on death falls within the nil rate band, there will be no IHT to pay on their estate. Inheritance tax is levied on death at 40% on the value of assets in excess of the nil rate threshold. The current value of the nil rate band is £300,000 and if this had actually risen in line with house prices this would currently stand at around £450,000.

If the nil rate band were to rise to £1,000,000 as under the Conservative proposals, this would mean that the assets of more people would be exempt from the tax. The increase in the threshold would result in a maximum potential IHT saving of £280,000 ((£1,000,000 - £300,000) x 40%) at current rates.

While the Conservatives have put forward this idea as a potential future policy it is important to note that current rules still apply in the meantime and individuals who may have an IHT liability should be looking at how best to deal with this.

Bob Perkins, Technical Manager at AEGON owned IFA Origen says; "People should remember that we are dealing with the reality of today rather than what might happen tomorrow. There are a number of steps people can take to mitigate their IHT liability and if they think they could be caught in the net, they should contact an IFA."