While Edinburgh’s property market has boomed thanks to its strong position in the UK’s house price growth records, the city has also seen the largest increase in inheritance tax bills, according to Scottish Legal News.
The law firm Boodle Hatfield reports that the increase in bills for Edinburgh residents rose by 315 percent to £54 million in 2018 to 2019. The sum works out at about £212,598 per estate, although obviously some residents will have paid far more or far less. In 2018, only £13 million was collected in Edinburgh, with the average working out at £149,425.
The strong house price inflation has paid a part, with property prices soaring by 5 percent in 2019, according to the Land Registry. Other areas of the UK have also seen substantial rises in inheritance tax takings.
Bedford rises
In Bedford in England, inheritance tax totals stood at £6 million in 2017-18, rising to £11 million in 2018-19, despite the number of estates eligible to pay inheritance tax increasing by 51 to 57 (six in total). In Glamorgan, Wales, inheritance tax totals increased from £15 million to 327 million over that same time frame, with the number of estates paying rising from 108 to 126.
A family home in an expensive area can often push an estate into a position where inheritance tax is due. The allowance for inheritance is £325,000, with 40 percent charged on any amount above this sum, although if the family home is passed to a direct descendant, this factor can result in an estate paying nothing.
With the residence nil rate band, estates are entitled to pass on an additional £175,000 in value of a main residence, as long as the estate is worth less than £2 million. Where estates are worth more than this, the allowance decreases by £1 for every £2 above £2 illion of the estate’s worth. Widows and widowers are entitled to pass on up to £1 million tax-free to their spouses, as they inherit their partner’s allowances.
Geoffrey Todd, partner at Boodle Hatfield, told Today’s Wills and Probate that many families had big rises in IHT bills because thresholds have not risen in line with house price inflation. He added that because the inheritance tax allowance was to remain at its current level until 2026, the trend was likely to continue for the next few years.
Finders International can help manage a property for the estate administrator or client saving considerable time, effort and expense with their Property Sales and Services. To see other services we offer then please visit our website.