Ahead of today's Budget, Halifax has joined in calling for the Government to index the Inheritance Tax (IHT) threshold to house prices.
According to the fourth Halifax Savings Report, detached property owners are more likely to be liable for IHT, as figures reveal 29% of detached property sales in the UK are above the 2006/07 IHT threshold of £285,000, compared to just 13% five years ago when the threshold was at £234,000.
Halifax calculates in London during 2005, 82% of detached property sales had a value above the IHT threshold, followed by 59% in the South East and 37% in the East of England.
House sales above the IHT threshold accounted for at least 25% of detached property sales in 38 counties, including 20 in the Southern England. However six were in Scotland, five were in the West Midlands and four were in Wales.
Meanwhile, 44% of semi-detached house sales in Greater London last year were above the IHT threshold for 2006/07, followed by 13% in the South-East, while sales above the IHT threshold, accounted for at least 50% of detached properties in nine counties, all of which were in London and the South-East, apart from Edinburgh.
Halifax says if the IHT threshold had been increased in lien with house price inflation over the past 10 years, the threshold would be £425,000 instead of £285,000, as house prices have risen 176% in the past decade, compared to just an 85% increase in the IHT threshold.
Figures from the Revenue, show Government income from IHT has risen 1.3bn, from 1.6bn in 1996/7 to £2.9bn in 2004/05. And a further rise is estimated to bring the total to £3.3bn in 2005/06, which would see a doubling of the amount over the last decade.
Tim Crawford, group economist at Halifax, says the IHT threshold has failed to keep pace with the growth in house prices over the past 10 years, with many more detached properties now caught in the IHT net.
He adds: “We call on the Government to index the IHT threshold for the increase in house prices in the past 10 years, which would bring it to £425,000, and to link the IHT threshold to house prices in the future.”
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