29% of detached house prices now occur above the 2007/08 inheritance tax (IHT) threshold of £300,000. Five years ago only 16% of detached properties were sold above the then IHT threshold of £242,000.
Biggest IHT impact on detached property owners in the South of England
In London Halifax calculates that 88% of detached property sales occurred above the IHT threshold over the past year, followed by the South East (59%) and the South West (31%). At least 10% of detached property sales occurred above the IHT threshold of £300,000 in all regions of the UK in the past year.
757 postcode districts in England and Wales with an average price above IHT threshold
There are 757 (44%) of postcode districts in England and Wales with an average detached house price above the IHT threshold. These span all regions of England and Wales. 99% of postcode districts in London have an average detached house price above the inheritance tax threshold of £300,000, as do 77% of post code districts in the South East and 57% of postcode districts in the South West.
More than 500 postcode districts have at least 50% of detached sales above the IHT threshold
Sales above the inheritance tax threshold accounted for at least 50% of property sales in 576 (34%) postcode districts across England and Wales in 2006. They include 97% of London postcode districts, 66% of postcode districts in the South East and 32% of postcode districts in the South West.
Average detached house across UK above IHT threshold
The average price of a detached property in the UK, at £326,396, is above the inheritance tax threshold of £300,000. By region the average detached property is above the IHT threshold in London (£697,625), the South East (£453,876) and the South West (£336,330). Five years ago only London (£392,135) and the South East (£269,080) had an average detached house price above the inheritance tax threshold.
Top ten postcode districts for detached house prices above IHT threshold are all in London & South East
N6 in Highgate (£2,620,154), SE21 in Dulwich (£1,524,231) and SW15 in Richmond (£1,420,673) are the postcode districts with the highest average detached house prices above the IHT threshold. (see Table 1)
SK9 in Alderley Edge has the highest detached house prices outside the south of England
SK9 in Alderley Edge (£819,172) in Cheshire is the postcode district with the highest house prices above the IHT threshold outside the south of England, followed by B15 in Edgbaston in Birmingham (£705,232) and B94 in Solihull (£693,921). 172 postcode districts outside the South of England have an average house price above £300,000, including 8 in Wales. (see Table 2)
Nearly half of all semi-detached sales in London above IHT threshold
8% of semi-detached property sales occurred above the 2007/08 IHT threshold of £300,000 in 2006, compared with 4% in 2001. 49% of semi-detached sales in London were above £300,000 in 2006, as were 16% of semi-detached sales in the South East.
Semi-detached houses in 258 postcode districts are impacted by IHT
Sales above the inheritance tax threshold accounted for at least 25% of detached house transactions in 258 (14%) post code districts in England and Wales in 2006. 248 of these were in Southern England with ten outside the South. These ten outside the South include postcode districts in the West Midlands (5), the North (3), Yorkshire & the Humber (1) and Wales (1).
London impacted by IHT across property types
In London in 2006 the average price of a semi detached house (£415,476), a terraced house (£385,593) and a bungalow (£331,997) were all above the 2007/08 inheritance tax threshold of £300,000, along with a detached house price (£697,625). In 2001 only the average price of a detached house (£392,135) in London was above the then inheritance tax threshold of £242,000.
IHT threshold has not kept pace with house price inflation
Since 1995/96 house prices across the UK have increased by 199%, more than double the increase in the IHT threshold, up 95% to £300,000 for 2007/08. If the threshold had increased in line with house price inflation since 1995/96, it would be now be at a level of £460,000, more than 50% above the 2007/08 £300,000 IHT threshold.
IHT revenue totals £16.4bn over past five years
Over the five years to 2007/08 Halifax calculates that total cumulative inheritance tax (IHT) revenue will be £16.4bn, up more than 50% from the £10.8bn raised by the government in the previous five years. Revenue raised in 2006 was a record £3.5bn, up £375m (12%) on 2005 when £3.1bn was collected. The government's own projections are for annual IHT revenues to reach £4.1bn in 2007/08.
Tim Crawford, Group Economist at Halifax, said:
"House prices have risen at a much faster rate than the inheritance tax threshold over the past decade. That has led to a sharp rise in the number of homes valued above the threshold. Now, the average detached house in the UK is valued above the inheritance threshold of £300,000.
We call on the government to raise the inheritance tax threshold to £460,000. That new level would account for the rise in property prices in the past decade."
