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Property price boom sees half of London estates stung by inheritance tax

Paloma Kubiak
Written By:
Paloma Kubiak

Property makes up half the wealth of estates in London paying inheritance tax (IHT), twice the number compared to most other regions.

In 2019/20, properties which were liable to pay the tax had an average value of over £820,000, according to HMRC data obtained by retirement specialist Just Group.

The average estate value in London was more than £1.4m, nearly £200,000 higher than the second highest region the South East.

The proportion of housing wealth in IHT-paying estates dropped to 39% in the South East at £604,000, 36% in the East of England at £524,000 and 32% in the South West at £474,000.

The data suggests that high house prices in London and the South East have been largely responsible for pushing more estates into paying IHT in these regions.

Stephen Lowe, group communications director at Just Group, said: “In London, where average property prices are far higher than the rest of the country, housing wealth makes up a bigger proportion of the wealth of estates that pay inheritance tax.

“This data was taken from the period up to the outbreak of Covid-19 and house prices rose significantly during the pandemic, with homeowners over the age of 55 benefitting from £1bn of property value growth every single day between March 2020 and June 2022.

“This is likely to have tipped many more estates over the IHT threshold, perhaps without the homeowners even realising.”

He added: “It is another reminder of why it is so important that people regularly assess the value of their estate, including an up-to-date valuation of their property.

“Professional, regulated advice can help people work out the full value of their estate and any tax they may be likely to pay on that wealth, along with suggestions on how to manage that tax bill and the most efficient way to pass on an inheritance to their loved ones.”

Related: Autumn Statement 2022: Inheritance tax threshold frozen for further two years
IHT tax-take soars as families are hit by frozen thresholds