One in 10 houses now liable for inheritance tax

One in 10 houses now liable for inheritance tax

The number of properties in Britain valued above the inheritance tax threshold has seen a three-fold increase in the past five years, according to research out today.

A study by Halifax found there are an estimated 2.1m homes in the UK worth more than £275,000, making up 12% of all owner-occupied properties.

Halifax estimates that the Treasury's take from the tax is likely to more than double from £1.6bn in the financial year ending 1997 to £3.4bn this year. Average house prices are now above the threshold in one in 10 local authorities, compared to one in 50 five years ago. London and the south-east had the largest proportion of properties in this category, headed by the boroughs of Kensington & Chelsea, Westminster, and Hammersmith & Fulham.

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Halifax said that if the government had raised the inheritance tax threshold in line with house prices, the £275,000 mark would now be £406,000. House prices have risen 164% since 1995 compared with an increase of only 79% in the threshold.

The tax ceiling was raised roughly in line with retail price inflation from 1997 to 2004. It rose 5% this year to £275,000 and a further 4% rise is due next April.

Martin Ellis, chief economist at Halifax, said: "This trend will worsen unless the government acts now and raises the threshold to fully reflect the increase in property prices. We call on the government to link the threshold to house price inflation."

Guardian Unlimited © Guardian Newspapers Limited 2005