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Just Group FOI request reveals regions where high house prices cause the biggest IHT headaches

Residential property makes up nearly half the value (49%) of estates facing Inheritance Tax in London compared to a quarter or less in areas including Wales (25%), the North East (24%), Scotland (23%) and Northern Ireland (18%).

Analysis of the HMRC figures provided to retirement specialist Just Group following a Freedom of Information (FOI) request also show that the proportion of estates made up of cash and financial securities is lower in London and the East of England than other regions.

“Although the average value of estates liable for Inheritance Tax doesn’t vary much by region, the
components of those estates is very different,” said Stephen Lowe, group communications director at Just Group.

Freedom of Information request from Just Group to HMRC for the Asset Breakdown by Geographical Region for Taxpaying Estates in 2018-19

“In areas such as London and the East of England property is a much bigger proportion of the estate and relatively low amounts of cash and securities are left compared to other areas which may require a very different approach to estate planning.”

Comparing the latest HMRC figures (for 2018/19) to the number of deaths recorded in each region that year suggests Inheritance Tax is due on about one in every 30 deaths (3.5%) in the UK. Estates left by those living in higher house price areas are most likely to pay IHT – London (7.6% of deaths), South East (5.7%), South West (4.3%) and East of England (4.1%).

“Property can be tricky when it comes to estate planning because it is providing a place to live and is often a sentimental as much as a financial asset” he said. “It is also illiquid in the sense you can’t sell or gift part of a property as easily as cash or other investments.

“That is why we are seeing equity release being used for estate planning because cash released can be gifted and, depending on how long the homeowner lives, may not form part of the estate on death or will attract a lower rate of Inheritance Tax.”

He said that innovations such as interest-servicing give new options for people with income to release lump sums early while having the security of a fixed interest rate and benefiting from any future price rise on the whole value of the property.

“These days our homes make up such a large proportion of a homeowner’s wealth that is important to factor it into to financial planning and to take professional advice,” he said.

“Whether it is to generate more income or lump sums, to make gifts or to pay for care in later life, the value tied up in a property can contribute to helping people meet their goals in later life.”

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