Budget 2015: Inheritance tax changes to affect properties in north London

Chancellor of the Exchequer George Osborne leaving Downing Street, London, before heading to the Hou

Chancellor of the Exchequer George Osborne leaving Downing Street, London, before heading to the House of Commons to deliver his first Tory-only Budget. - Credit: PA Wire/Press Association Images

George Osborne has raised the threshold on inheritance tax in today’s budget, directly affecting hundreds of properties in north London.

The new inheritance tax threshold will mean that properties worth up to £1 million can be left to children or grandchildren completely free of inheritance tax from April 2017.

This will be achieved by phasing in a new £175,000 allowance on top of the current £325,000, bringing the total allowance up to £500,000, which couples and partners can then combine to £1 million. Those who decide to downsize will not lose any of the allowance.

“The wish to pass something on to your children is about the most basic, natural and human aspiration there is,” Osborne said.

According to data from the Office of National Statistics, only five constituencies in the UK have an average house price above the current threshold.

All five are based in London, with properties in Hampstead, Westminster North, Chelsea, Westminster and the City of London and Kilburn all having an average selling price of between £650,000 and £1 million last year, meaning that many will still have to pay the tax.

While Zoopla have reported that 953,498 more properties will now be exempt from the tax, average prices in Kensington of £1.15 million mean that most properties in the borough will exceed the new threshold.

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Trevor Abrahmsohn, Director of Hampstead-based Glentree estate agents, specialising in the luxury property market, said the changes would be welcome to his clientele.

“It’s a gift to the middle income and lower income of society, which I suppose is right and proper. It’s the most odious tax and raises really very little money so these changes are long overdue,” he said.

“Sadly I do not think there will be a direct impact on the property market from the budget and I think the market will go into a bit of a slumber in the summer months.”

The changes were also welcomed by CEO of online estate agent eMoov.co.uk, Russell Quirk.

He said: “Today’s announcement has given the government’s property death tax a new lease of life and is a small step in the right direction.”

However he added that George Osborne had used the changes to inheritance tax as a “smoke screen to detract from the glaring issue of housing supply, which he has yet again failed to address in any meaningful way.”

Green party leader Natalie Bennett was also disdainful of the inheritance tax changes, commenting on Twitter: “£1 million threshold for house inheritance tax, a further transfer of money to London and the Southeast.”

At present, inheritance tax is charged at 40 per cent above a threshold of £325,000 for an individual and £650,000 for married couples and civil partners.