Thousands could be reclaimed in inheritance tax following falling house prices in London and the South East
Families in London and the South East of England could reclaim thousands of pounds in inheritance tax following the latest slump in house prices.
Data released this week by HM Land Registry revealed the average house price in London fell 1.4% over the year to August 2019 from £479,550 to £472,753.
The average house price in the South East fell 0.6% from £328,061 to £326,232.
Inheritance tax is charged on the value of assets at death and must be paid before the estate can be handed over to the family.
But if executors sell a property for a lower value within four years of the death, they can reclaim the tax paid on the loss through an IHT38 form.
In some areas of London, such as Kensington and Chelsea (9.1%), Brent (8.7%) and Westminster (6.9%), high property prices have fallen steeply, leading to the potential for large rebates.
Sean McCann, Chartered Financial Planner at financial advice firm NFU Mutual, said “Many people in the capital and the South East could be paying more inheritance tax than they need to.
“When property prices and share values fall, rebates are not given automatically and need to be proactively claimed.
“Those that opt for do-it-yourself probate are not always aware that inheritance tax can be reclaimed in this way.
“With such a dramatic fall in high house prices in London and the South East, families should take advice to ensure they don’t miss out on any potential rebates.”
Reclaiming inheritance tax on sell of shares
It’s not just falling house prices that could lead to a tax rebate.
If an executor sells shares and some other investments within 12 months of death, they can also reclaim IHT paid on any loss through an IHT35 form.
Be warned, if some shares or unit trusts have risen and others have fallen, all the sales are aggregated.
To maximise the reclaim value, as an alternative you could assign the ones that have gone up in value direct to beneficiaries and only sell those that have fallen in value.