House prices in the UK are expected to fall dramatically over the next year which could have an effect on the amount of inheritance tax people pay.
Last week Lloyds Banking Group warned that house prices could fall by as much as a fifth next year due to the hit to mortgage lending amid mounting interest rates. According to Nationwide’s October House Price Index, house prices fell by 0.9 percent between September and October this year. This was the first monthly fall since July last year and the biggest since June 2020.
If house prices were to fall even further, such as the 20 percent predicted by Lloyds Banking Group, people who are inheriting property from someone who has died could end up paying a lot more inheritance tax than they may anticipate. This is because, when calculating the value of a deceased person’s estate, HM Revenue and Customs (HMRC) uses the property value at the date of death and not when it is sold. This means if a property on the date of death is worth £1million, but it is sold several months later at £850,000 if the market price drops by 15%, then a person would have to pay inheritance tax on the value of £1million. This could possibly add tens of thousands of pounds to an inheritance tax bill.
Inheritance tax is a tax people pay on the estate of someone who has died and the estate is made up of the property, money and possessions of the person who is deceased. Currently, Britons pay a tax of up to 40% on the value of an estate above the current nil rate band threshold of £325,000. However, there is a way that people can get try and get their money back and this is through HMRC’s IHT38 relief scheme.
This little-known scheme allows the value of the sale price to be swapped for the value of the property at the time of death. To apply for this, a person must make a claim using HMRC’s IHT38 form. On this form, people will need to give information about the property, how much it was sold for, whom it was sold to, and the sale date. But, before going ahead, it is very important to think carefully becaus,e once submitted, a claim cannot be withdrawn.
If you have recently inherited a property and need advice, please contact us here.
Articles on this website are offered only for general information and educational purposes. They are not offered as, and do not constitute, financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional.
Past performance is not a guide to future performance and may not be repeated. Capital is at risk; investments and the income from them can fall as well as rise and investors may not get back the amounts originally invested.
You are now departing from the regulatory site of Finura. Finura is not responsible for the accuracy of the information contained within the linked site.
Sources: Techlink
As we enter a new tax year, it’s a great time to take stock of your pension and make sure you’re making the most of the opportunities available. Here are the key updates and considerations for 2025/26 to help you stay ahead and get the best value from your retirement planning.
Rio Stedford, Head of Financial Planning at Finura, spoke to Professional Adviser about how the future of wealth planning now lies in a holistic approach that integrates hyper-personalisation, emotional intelligence, and outcome-based strategies 2025 marks a pivotal moment for the wealth management profession. Rapid technological advancements, shifting client expectations, regulatory, and political changes are reshaping […]
The “Spring forecast” will be presented to Parliament on 26 March 2025, alongside a statement from the Chancellor, Rachel Reeves. What do we anticipate being announced?