Inheritance tax shoots up

A nuisance for many homeowners has been 2 taxes, one being stamp duty and the other being inheritance tax. Inheritance tax is payable upon a person’s death at a rate of 40% of their total wealth, including their home.

Currently, the tax comes into force when a person’s personal assets exceed £300,000 – this figure is reviewed by the government each tax year. However, the majority of people in London will say that £300,000 is less than the average property price for a property in the city.

Inheritance tax is being raised from £285,000 to £300,000 for the 2007-2008 tax year – a figure well off the rate of house price inflation which has risen by an astonishing 189% over the last decade.

According to the Office of National Statistics, there are nearly 5 million homeowners in the UK with property worth over £300,000. Taking into account personal wealth, this adds another 4.5 million to the figure. Consequently, the revenue raised from inheritance tax has been increasing significantly each year for the Treasury, rising from £3.1 billion in 2005 to £3.5 billion in 2006.

Financial research company, Defaqto, have advised that people organise their finances as soon as possible. Property prices in the UK continue to exceed increases in the inheritance tax threshold, an increasing amount of households are falling into the inheritance tax net.

Defaqto added that tax planning in advance is vital if individuals want to leave their assets to family. The company advised that writing a will is a good starting point.

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