The latest figures from house sales on the UK show that house prices have risen 8.9 percent in the last year, meaning that people will be liable for higher inheritance tax when they are left a property.

This is Money reports that in April to May 2021, inheritance receipts were £966 million, up 3340 million from the same period last year, partly attributable to the increase in value of people’s homes.

Financial advisers warn that many people do not realise that more estates will pass the threshold for inheritance tax. House price averages according to the sales reported by HM Land Registry now average £250,772.

Tax threshold

The inheritance tax threshold is £500,000 for your estate if you plan to pass your property to your children, or up to £1 million if you are a surviving spouse or civil partner who inherited that property originally from them. Out with these categories, the limit is £325,000.

This is Money’s analysis of data showed that more than 19,500 homes were purchased for over half a million pounds in the first quarter of 2021.

This is Money analysis of Land Registry price paid data shows that more than 19,500 homes were bought for over £500,000 in the first quarter of this year, with some areas of the UK seeing 15 percent increases in house prices.

40 percent rate

The government has frozen the £325,000 nil-rate band until April 2026, which means that even modest increases in estates could still be hit by inheritance tax according to the experts. The standard rate of inheritance tax is 40 percent on anything that is over the £325,000 threshold, except where the thresholds are added together.

Financial experts said that if the £325,000 allowance had been adjusted for the consumer price index inflation, it would now be about £414,000 per person. Financial advisors have already reported increases in the number of people seeking advice on inheritance tax planning in the past year.

In 2009/10, the UK Government made £2.38 billion from inheritance tax. In 2020/21, this figure had increased to £5.33 billion, according to the HMRC and NFU Mutual. The average UK house price has increased by about 60 percent since 2009, meaning that a £325,000 house would now be worth £520,000.

It is thought that the Treasury may consider increasing inheritance tax and capital gains further to cover some of the funds spent on emergency support for the pandemic.

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