Around 1.5 million homes are currently valued at more than the 2006/07 inheritance tax (IHT) threshold of £285,000, with the number set to triple in the next 14 years, according to research from Halifax.
Marking the start of the new financial year, Halifax claims around 8% of owner occupied homes are above the current IHT threshold, but suggests this will almost triple to 4.2 million properties by 2020 if the threshold continues to increase only in line with retail price inflation.
Halifax claims if these projections are correct, the revenue collected by the Exchequer from IHT could rise to £5.5bn a year by 2020, which is a 244% increase from the £1.6bn it received in 1996/97, when the IHT threshold was last raised significantly.
The research also calculates if the IHT threshold had risen in line with house price inflation over the last decade, the limit would now be £425,000 instead of £285,000, as house prices have risen 176% in the past 10 years, compared with just an 85% increase in IHT.
Meanwhile, latest figures from the Inland Revenue show the number of estates with assets of less than £500,000 which pay IHT has increased by 70% from 11,279 to 19,166 over the last six years.
Martin Ellis, chief economist at Halifax, says since 1996/97 there has been a sharp increase in the number of estates paying inheritance tax and also the number of properties valued above the IHT threshold.
He adds: “Modest increases in the threshold have lagged well behind the increase in house prices. If this trend continues, we project more than 4 million properties will be valued above the threshold by 2020, and IHT revenue could be as much as £5.5bn a year.”
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