Average House Above Inheritance Tax Threshold In 10% Of Towns

A new report from Halifax claims that 48 out of 482 towns in England surveyed has a average house price that is above the IHT threshold.

Inheritance Tax is paid on the 'estate' of people who pass away and the current exemption limit is set at £285,000, with everything over the threshold charged at 40 per cent tax.

The bank claims that inheritance tax is no longer a tax of the rich and many families are suffering because the threshold has failed to keep up with property price rises. Halifax wants a new limit of £430,000 imposed to bring the threshold in line with the housing market.

The report indicates that around 20 per cent of towns in England have an average house price that is within 20 per cent of the threshold, with analysts predicting that the number of towns with average homes costing more than IHT threshold will soar to 20 per cent by 2010.

IHT generates around £3 billion a year for the UK economy and is traditionally calculated using the retail price index (RPI) rather than property prices. House prices have rocketed by 179 per cent over the past ten years, compared with an 85 per cent in the IHT threshold.

Halifax economist, Tim Crawford, said: "We call on the government to raise the inheritance tax threshold to £430,000. Doing so would allow for the significant increase in property prices over the past decade. It would also ensure that many middle income home owners avoid a tax which was never intended that they pay in the first instance."