The rise in property prices in the past year may have an effect on the number of people who have to pay inheritance tax, experts have warned. House prices have reportedly increased by 8.9% in the past year. This may mean that more will pay inheritance tax when someone leaves them property in their Will.
New figures from HMRC show that inheritance receipts in April to May 2021 were £966million – £340million higher than the same period last year, due in part to an increase in the value of many people’s homes.
Financial advisers say significant increases in property values may mean that more estates will nudge past the threshold where inheritance tax is due, without them realising it.
Current rules state that if you give away your family home to your children, £500,000 is the maximum value that your estate can reach before you start being liable for inheritance tax – or up £1million if you are a surviving spouse or civil partner who already inherited the property from them.
If you do not fall into this category, your limit is £325,000. This is the standard nil-rate band. The nil rate band is the threshold above which Inheritance Tax is payable.
Why More Will Pay Inheritance Tax
Inheritance tax (IHT) is payable at 40 percent on the value of an estate above a certain threshold of a person who has passed away. To avoid taxation as much as is legally possible, many people choose to take preventative action before they pass away.
In England and Wales, if an Estate is worth more than £325,000 when a person dies, then they typically have to pay Inheritance Tax. Currently, the Inheritance Tax rate is 40% on anything above the threshold. If a person leaves more than 10% of the estate’s value to charity, then the rate may reduce to 36%.
If inheritance tax is payable
The grant of representation will not usually be issued until the inheritance tax (IHT) has been paid to HMRC. This can potentially cause a delay in the administration of the estate.
You usually have to pay 10% of the tax due on the value of property and shares plus all of the tax due in respect of the rest of the estate. This tax payment should be made within six months of death. The additional tax is payable in yearly instalments over a ten-year period, or as soon as they are sold. Interest will start to accrue on any outstanding inheritance tax after six months from the date of death.
Due to the rise in house prices in 2020-2021, it may mean that more will pay Inheritance Tax.
How We Can Help
Here at The Inheritance Experts we work with solicitors who have years of experience dealing with inheritance claims. This includes inheritance tax matters. Contact us today by filling in our contact form. Or call us on 01614138763 to speak to one of our friendly knowledgeable advisors.