Property wealth accounts for 47 per cent of the value of estates paying inheritance tax (IHT) in London, on average, according to an HMRC Freedom of Information (FOI) request from Just Group.

The FOI showed that property wealth made up a third or above of the value of IHT-paying estates in the majority of regions in the UK in the most recent financial year of data available (2022/23).

In London, the average IHT-paying estate value was £1.6m, while average property value was £862,000, making it the region with property as the greatest proportion of estate value.

It was followed by the South East and East of England, both with property making up 42 per cent of average estate value.

On the other end of the spectrum, property wealth made up around a quarter of the value of the average IHT-paying estate in Scotland (24 per cent), Northern Ireland (25 per cent), and the North East of England (26 per cent).

Cash and securities made up a far larger proportion of estates in regions other than London, the East and South East of England, although there were substantially fewer estates liable for IHT outside of those three regions.

Just Group said this suggested that higher house prices in London, the East and South East of England were largely responsible for pushing more estates into paying IHT.

“Our FOI request seeks to uncover how important property is when it comes to estates that pay IHT, especially in those areas with the highest house prices,” said Just Group director, David Cooper.

“It is evident that housing wealth in regions like London, the East and the South East makes up a larger proportion of the estates compared to other regions. The average value of property in London estates paying IHT is nearly double that of most other regions across the UK.

“The introduction of the residence nil-rate band in 2015 reduced the IHT due for some of those leaving property to a direct descendant but the threshold has been held at £175,000 since 2021.

“With asset prices continuing to grow and the IHT regime seeing a significant tightening in the Autumn Budget 2024, it’s likely more people will be dragged into paying the tax through the value of their property.

“Estate planning is a complex area that can benefit from professional financial advice. A professional adviser can help people who want to manage their estate in an efficient way and ensure as much as possible can be passed on to loved ones.”

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