The average house price in greater London has broken the £300,000 barrier – the new inheritance tax threshold.
According to the Halifax House Price Index, in the second quarter of 2007, the average house in the capital cost £313, 122, which means the average house in London is now liable for Inheritance Tax, which is set at £300,000, and this is because, says Halifax, the IHT threshold has failed to keep pace with house price inflation.
Since 1995, house prices have increased by 219%, which is more than double the increase of the IHT threshold of 95%, from £154,000 in 1996 to £300,000 now.
If IHT had been set with inflation, it would now be set at £490,000.
And the average house in the South East is now £259,904, which means it has gone through the 3% stamp duty barrier, set at £250,000.
Commenting on the data, Tim Crawford, Halifax group economist, said: “The typical homebuyer in London and the South East, in particular, faces a rising tax burden due to the government's continuing failure to increase the inheritance tax and stamp duty thresholds in line with house price inflation.
“We call on the government to raise the stamp duty thresholds and the inheritance tax threshold in line with past increases in house prices over the past decade.
“We believe the government also should commit to index link all property related tax thresholds to house price inflation in the future."
Find out more about Inheritance Tax