More people set to be dragged into inheritance tax trap, warns property expert

People inheriting property will find themselves paying out more in future as the Government is expected to rely on Inheritance Tax to raise more cash for public services, a leading property expert has warned.

Jonathan Rolande, the founder of House Buy Fast and lead spokesman for the National Association of Property Buyers, says ministers are looking to boost IHT receipts to shore up the nation’s finances.

More people inheriting property are set to be dragged into paying IHT if the tax-free threshold is left unchanged and the payable rate is increased in the impending Budget, he has warned.

Mr Rolande said: “When the tax-free threshold was set at its current level in 2009, the price of an average home was £157,000. It is now £285,000, close to double what it was.

“And yet the threshold remains at its 2009 level, dragging an ever higher number of homeowners into Inheritance Tax.

“This is another example of so-called fiscal drag, much like Income Tax thresholds that have failed to keep up with inflation.

“The issue is particularly acute in the South-East and in our city centres where average prices are highest.

“With further house price inflation likely this year, more and more people will find themselves subject to tax when they die.

“The October Budget, already slated to be ‘painful’, may add to the problem if the threshold is not increased but the payable rate is.

“But it can be argued that homeowners should accept the tax as a fact of life, or indeed death.

“Few would disagree that public finances and services are in a pretty dire state. Taxing the dead, or the beneficiaries, is seen as a relatively painless way to raise much-need revenue to

spend on essential services.

“It raised £7.5 billion last year – what would replace that?

“It is mostly property that drags people into paying, and in most cases house price growth is the epitome of unearned income. Tenants do not benefit from this.

“IHT redresses some of that inequality and raises enormous sums of money. Fair or not, it is here to stay.”

Mr Rolande’s comments come amid a welter of speculation about potential changes to a variety of taxes that could be made by Chancellor Rachel Reeves in the Budget.

She is expected to announce measures that will raise an additional £20 billion for the Treasury by introducing changes to IHT, Capital Gains Tax, and pension contribution reliefs.

One former Treasury official has suggested that the Government could increase the rate of IHT from 40% to 45%, raising £1 billion – and even reduce the threshold by £50,000 to raise another £1 billion.

Other options that have been floated are scrapping of IHT relief on agricultural property and business assets.