People living in 'hotspots areas' could be facing a massive inheritance tax bill of £50,000 or more,...
People living in 'hotspots areas' could be facing a massive inheritance tax bill of £50,000 or more, HSBC says.
As house prices have been booming in the past couple of years, hundreds of thousands of people could now be liable to pay inheritance tax just because of the value of their property.
High property values in many parts of England and Wales are driving many people over the £255,000 IHT threshold, HSBC says.
Many people are not aware that the value of any property is included when estimating the value of an estate for IHT purposes.
Even though anything left to a spouse is free of IHT, tax will have to be paid on the surviving spouse's death.
As a result, family members are being left fully liable to IHT at a rate of 40% on any remaining assets.
In the UK, eight out of 33 London boroughs and three areas in England and Wales have an average property value that exceeds £255,000.
According to HSBC, the average estate has assets excluding property of £55,000.
This leaves the top 10 most expensive property areas paying the following in IHT:
|Area||Average property value||IHT payable*|
|1. Windsor & Maidenhead||£322,101||£48,840|
|4. Greater London||£241,838||£16,735|
|6. West Berkshire||£216,669||£6,667|
|9. Bracknell Forest||£201,020||£408|
|10. Bath and North East |
* Calculated on the basis that the assets are held by a single person, that the property is a private residence, solely owned, and that the property and other assets of £55,000 are not in trust.
Also, eight out of 33 London boroughs have average property values in excess of £255,000, HSBC estimates.
Adding the average assets of £55,000 to the London boroughs, the following IHT would be payable:
|London Borough||Average property value||IHT payable*|
|1. Kensington and Chelsea||£581,561||£152,624|
|2. City of Westminster||£449,429||£99,772|
|4. Hammersmith & Fulham||£344,804||£57,922|
|5. Richmond upon Thames||£337,140||£54,856|
|6. City of London||£308,350||£43,340|
*Calculated on the basis that the assets are held by a single person, that the property is a private residence, solely owned, and that the property and other assets of £55,000 are not in trust.
On the bright side, HSBC has estimated that some 'lucky' house owners would need an excess of £185,000 in average in addition to any property before being liable to IHT:
|Area||Average property value||Extra assets needed for IHT liability|
|1. Blaenau Gwent||£41,529||£213,471|
|2. City of Kingston upon Hull||£49,775||£205,225|
|3. Merthyr Tydfil||£52,028||£202,972|
|5. Rhondda Cynon Taf||£56,445||£198,555|
|6. Neath Port Talbot||£57,051||£197,949|
|8. Blackburn with Darwen||£62,135||£192,865|
|10. North East Lincolnshire||£63,095||£191,905|
Nevertheless, these homeowners should not make themselves too comfortable, HSBC adds, as no matter what the property is worth, it is always wise to take into account any tax implications.
"Any increase in the IHT threshold is usually linked to the Retail Price Index (RPI). However, house price increases far outstripped any increase in the RPI last year, with an average price rise of 16.9% against an increase in the RPI of 2.2%," says Phil Dillnutt, managing director for Private Clients at HSBC Bank.
Therefore people who weren't previously liable for IHT could find that they are now, and people with above average-value homes are likely to be hit with an even greater bill."
"This is a complex area of tax, but expert advice and estate planning can reduce an IHT bill. HSBC Bank Private Clients can help you assess your likely IHT liability, and suggest ways of keeping it to a minimum."
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