One in Ten Towns With An Average House Price Above The Inheritance Tax Threshold
23 September 2006
Source: HBOS
New Halifax research shows that the average house price is above the inheritance tax (IHT) threshold of £285,000 in 10% (48) of the 482 English towns surveyed. This is two and a half times the number five years ago when only 4% (19) of towns had an average house price above the then threshold of £242,000.
The overwhelming majority – 46 out of 48 - of these towns are in the South of England. The other two towns above the IHT threshold are Wilmslow in Cheshire and Ilkley in West Yorkshire.
20% of properties in England projected to be above IHT threshold by 2020
Halifax estimates that 1.4 million (9%) English properties are now valued at more than the 2006/07 threshold of £285,000. Halifax projects that the number of English properties potentially liable for IHT will more than double to 20% or 3.5 million properties by 2020 if the threshold is only increased in line with retail price inflation*.
Nearly 20% of towns have an average house price within 20% of the threshold
The average price of a property in around 20% of English towns is getting closer and closer to the IHT threshold. In just over 90 towns the average house price is now within 20% of the current IHT threshold. In 2001 only 10% of towns in England had an average house price within 20% of the IHT threshold. In 145 English towns the average house price is now within one third of the current threshold.
Significant increase in towns in south of England above threshold
More than one third of London boroughs (13 out of 32) have an average house price above the threshold, compared to less than one quarter of boroughs in 2001 (7 out of 32). Almost one in five towns surveyed in the South East (33 out of 169) have an average house price above the IHT threshold against less than one in ten in 2001 (12 out of 169).
* Calculation takes into account threshold rises already announced up to 2009/10
Highest proportion of sales above inheritance tax threshold
• The London boroughs with the highest proportion of sales above the IHT threshold are Kensington & Chelsea (84%), Westminster (72%), and Camden (66%). Sales above the inheritance tax threshold accounted for at least 20% of transactions in 69% (22) of London boroughs over the past year.
• The towns with the highest percentage of sales above the IHT threshold are Gerrards Cross (82%), Weybridge (68%), Ascot (65%) and Hook (62%). Ilkley in West Yorkshire has the highest proportion (36%) outside the south of England, followed by Wilmslow in Cheshire (33%).
• Sales above the inheritance tax threshold accounted for at least 20% of sales in 22% (108) of English towns over the year to June 2006. 81% (87) of these towns are in London and the South East.
• Sales above the inheritance tax threshold accounted for at least 50% of sales in 4% (18) of towns/ boroughs. All these are in London and the South East.
POLICY RECOMMENDATIONS
• A continuing failure to index-link the inheritance tax threshold with house price inflation will see more estates becoming potentially liable to pay inheritance tax.
• Halifax is calling on the political parties to reform IHT and raise the threshold to £430,000 to allow for house price inflation over the past 10 years and to make a commitment to link the threshold to house price inflation in the future.
• We estimate that this change would cost the Exchequer approximately £1bn per annum in lost revenue.
Tim Crawford, Economist at Halifax, said:
'The potential reach of inheritance tax is growing. More and more homes are now valued above the threshold. 10% of English towns have an average house price above the threshold, compared to only 4% five years ago.
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
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