The average London home is likely to climb to £331,000 next year, surpassing the current inheritance tax (IHT) threshold of £325,000, according to new analysis by venture capital investor, Albion Ventures.
Its analysis shows the average home in the South East could trigger an inheritance tax bill by 2019 and, across the UK, homeowners could expect to see their property exceed the current IHT threshold by 2025.
Albion’s findings come as average residential property prices (particularly in London and the South East of England) continue to soar while the IHT threshold remains fixed for the sixth straight year at £325,000 and is set to stay at this level until at least 2018.
Albion’s analysis shows that house prices have increased by an average of 5.8% a year across the UK since 1986, but many areas of the UK have seen much higher rises over the last 12 months. In London, house prices have grown by 15.4% while the average across the UK is 7.5%. Since 1986, the IHT threshold has risen by an average of 5.4% a year, but has remained at £325,000 since the 2010/11 tax year and will be frozen at this rate until at least April 2019. Had IHT continued to rise in line with its historic average it would currently be £401,442 in 2013/14 rising to £423,212 in 2014/15.
Meanwhile, the average home in the South West is forecast to cross the IHT threshold by 2023 while those in Scotland and Northern Ireland may take over 20 years to do so (2036 and 2042 respectively).
Patrick Reeve, managing partner at Albion Ventures said, “Rising house prices have been welcome news for many, but there is a downside in that many more homeowners will be liable for IHT.
“It’s no longer the very wealthy who are affected by this tax and it’s becoming increasingly important, particularly for homeowners in London and the South East, to take action to reduce their liability.”
