PROPERTY AND FINANCE: CHANGING HOUSE VALUES INCREASING INHERITANCE TAX RISK
For many people, property represents their greatest source of wealth. But as values rise and circumstances change, homeowners are increasingly asking more questions — about retirement, inheritance, and how best to protect what they’ve built.
We spoke with Gemma Wass, Associate Director at Harding Financial, an independent financial planning firm based in Guildford, about what today’s property owners need to know and why reviewing plans now could make a meaningful difference.
PROPERTY VALUES HAVE INCREASED SIGNIFICANTLY OVER THE LAST DECADE. WHAT IMPACT IS THIS HAVING ON FAMILIES TODAY?
For many people, their home has quietly become their largest asset. When combined with other assets, savings and investments, this means more families now sit closer to, or above, inheritance tax thresholds. At the moment, pensions sit outside this calculation, but this landscape is expected to change from April 2027, meaning estate values could increase significantly overnight for some families.
FOR THOSE LESS FAMILIAR WITH IT, WHAT EXACTLY IS INHERITANCE TAX, OR IHT?
Inheritance tax is a tax that can apply when the value of someone’s estate exceeds certain allowances when they die. At present, each individual has a £325,000 ‘nil-rate band’. An additional £175,000 ‘residence’ nil-rate band may apply where a main home is passed to direct descendants, dependent on estate value. This means a potential total allowance of up to £500,000 per person, or £1 million for many married couples and civil partners. Where an estate exceeds these thresholds, inheritance tax is typically charged at 40% on the value above the allowance. While IHT is often associated with the very wealthy, frozen thresholds and rising property prices mean many families are increasingly within the scope – sometimes without realising it.
WHY IS INHERITANCE TAX BECOMING MORE PROMINENT IN CONVERSATIONS NOW?
Two factors are colliding here. First, inheritance tax thresholds have been frozen for several years, despite rising asset values. This means more estates fall into the IHT net each year without people becoming wealthier in real terms. And second, from April 2027, unused defined contribution pension funds are expected to be brought into inheritance tax calculations for many people; this is a significant change to long-standing rules. For families who have spent decades building pension wealth, this could materially increase the value of their taxable estate.
CAN YOU EXPLAIN THE PENSION CHANGE IN SIMPLE TERMS?
At present, most pensions sit outside the estate for inheritance tax purposes, meaning they can be passed to loved ones relatively tax efficiently. From April 2027, most unused defined contribution pension pots are expected to be included in the value of an estate on death, although pensions left to a spouse or civil partner are still likely to be exempt. This doesn’t mean everyone will suddenly pay inheritance tax, but it does mean pensions can no longer be ignored when thinking about long-term legacy planning.
WHAT ARE SOME COMMON MISUNDERSTANDINGS AROUND INHERITANCE TAX?
One of the biggest misconceptions is that inheritance tax is unavoidable or that planning automatically involves giving assets away or losing control. In reality, good financial planning looks at the full picture – lifestyle, income needs, family dynamics, property, and long-term intentions – before exploring appropriate strategies. Another common assumption is that inheritance tax is only something to tackle later in life. In practice, planning often works best when considered early and reviewed regularly, rather than left as a last-minute exercise.”
CALL 01483 80 20 10 AND TALK TO US ABOUT YOUR IHT CONCERNS TODAY.
HARDING FINANCIAL PROVIDES INDEPENDENT FINANCIAL ADVICE TO PRIVATE CLIENTS AND ORGANISATIONS ACROSS THE UK. WE ARE AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY WITH REF 555911.
FOR INFORMATION VISIT: WWW.HARDINGFINANCIAL.CO.UK | CALL: 01483 802010 | EMAIL | INFO@HARDINGFINANCIAL.CO.UK
