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‘One in three homes to be hit by IHT in the next 20 years’

One in three households will be affected by inheritance tax over the next 20 years and 68 per cent more estates will pay IHT this year than a decade ago, warns Scottish Widows.

Domestic estates paid out 2.9bn in IHT to the Revenue last year, which is more than the Government took in CGT over the same period.

The proportion facing IHT is higher than the rest of the country, with the average house price in the capital hitting 300,000, according to Land Registry data, over the 275,000 IHT nil-rate band. Research by Widows shows that 57 per cent of households have taken no steps to cut their liabilities.

Despite this, 45 per cent of people believe they have assets worth more than 275,000 and the same number expect to inherit 50,000-100,000 in the next 10 years.

Senior technical manager Anne Young says a worrying number of myths exist around IHT and Widows has produced an extensive information pack for advisers to use with clients, including an IHT calculator. This has been timed to coincide with the launch of Widows’ discoun- ted gift trust.

Young says: “The Government now earns more from IHT than it does from CGT and most people’s liabilities are almost exclusively down to property.”

Hometrack housing economist John Wriglesworth says the outlook is likely to get bleaker for Londoners. He says: “House prices are set to end the year 4 per cent down on 2004 but strongly rising incomes and the expectation of big City bonuses should boost further demand in the capital in 2006.”

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