Huge numbers of middle classes dragged into inheritance tax

Huge numbers of middle-class people in London and the south east are being hit by inheritance tax, even though it was meant to hit the super-rich, figures suggest.

Rising property prices combined with a freeze on the inheritance tax allowance has led to the number of properties qualifying for the costly tax - homes valued at £325,000-plus - to increase by 50 per cent over the past five years.

Figures have revealed that the ten places where the most inheritance tax had been paid out were all in London and the south.

The north London borough of Barnet has been hit hardest with 240 people paying inheritance tax in 2010/2011, the most recent time period available.

A source at estate agent Savills said while Barnet did not have the costliest properties in London - in 2013/2014 58 per cent of homes were sold at £325,000-plus compared to 96 per cent in Kensington and Chelsea - it did have an older and less transient population than other areas.

The amount of housing wealth owned by over 65s in Barnet was 38 per cent compared to a quarter in Kensington and Chelsea.

Similarly Chichester in West Sussex has an older population - 50 per cent of the housing wealth is owned by over 65s while 190 people paid inheritance tax in 2010/201 - and was named the location where people had been second most-affected by inheritance tax.

Other local authorities which had a high proportion of homes eligible for inheritance tax included Wiltshire, Bromley, Richmond, Cornwall, Wandsworth and Westminster.

MP for Finchley and Golders Green Mike Freer, part of Barnet's local authority area, told the Telegraph: "IHT and any proposed Labour Mansion Tax would be a double whammy on hard working families.

"People who have worked hard and saved to buy a home are now being penalised by doing the right thing. These taxes are a tax on aspiration."

A spokesman for Savills, which compiled the figures, added: “Given property values and the pattern of recent house price growth, the increasing inheritance tax burden has become heavily concentrated in London and the South East.

“Unless thresholds are increased, it is likely to become a greater consideration for an increased number of middle class households.“That is likely to cause those affected to give more thought to downsizing and passing some of their housing wealth down a generation.”

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