Proportions were even higher in some locations, for example, 94% of properties sold in East Central London were over the inheritance tax nil-rate band, says the research from Saga Investment Services.
The research also found that just one in 10 individuals can correctly identify the IHT threshold for a single person, and a mere 4% for married couples and civil partners. Just 10% correctly said £325,000, some 21% thought it was higher and 19% said it was lower, while 50% didn’t know.
The report points out that new ‘main residence’ allowance to be introduced in April 2017 will benefit home owners.
Overall the number of properties sold at prices above the £325,000 starting point has doubled over the past six years from 13% of properties in 2009 to 24% in 2015, according to the study which analysed six years’ worth of property sales data published by the Land Registry.
Despite the number of property sales in 2015 decreasing by 3.7% compared to 2014, sales exceeding £325,000 have soared by 11.4% over the same period.
A breakdown of the figures show that after East Central London the next location with the highest number of property sales over the IHT threshold is West London with 90%, then South West London at 88%, the West End of London at 86% and North West London at 83%.
But outside of central London, the proportion of properties sold above £325,000 has also been rising sharply. Some 28% of postcode areas have seen the number of property sales exceeding the IHT threshold double in the past six years, including Brighton, Bromley, Bristol, Cambridge, Colchester, Croydon, Durham, Northampton, Norwich, Portsmouth, Stevenage, Tweed, Uxbridge and Watford.
For married couples and civil partners, any unused IHT allowance can be passed on to the surviving partner, meaning the total that can currently be handed over without a potential tax bill could be £650,000.
Across England and Wales, the number of properties sold above this level has doubled since 2009, from 2.4% to 5.5%. There are 17 postcode areas in which one in every 10 properties sold in 2015 exceeded £650,000, compared to seven in 2009.
In 2015 some 60% of all properties sold in the EC postcode area exceeded £650,000, up from 14% in 2009, while 56% of property sales in West End, 53% in West London and 44% of sales in South West London.
The research also shows that just 4% of over 50s living in London correctly identified the IHT threshold for married couples and civil partners and 17% believed there was currently no maximum, while 20% thought the threshold was lower.
On 06 April 2017 a new IHT allowance will be introduced for people passing on their main home to a direct descendant. This will rise each year from £100,000 in 2017 to 2018, £125,000 in 2018 to 2019, £150,000 in 2019 to 2020 and £175,000 in 2020 to 2021.
This means married couples and civil partners can pass on a possible £1 million to their family by 2020. It will then rise with inflation, measured by the consumer prices index, from 2021 onwards.
If someone downsizes their home, they will still be able to pass on assets to the equivalent value of their current home to direct descendants. However, estates exceeding £2 million will see the additional nil-rate band withdrawn, tapered at a rate of £1 for every £2 their estate is above this amount.
‘When the initial nil-rate band was set at £325,000 in 2009, just over one in 10 properties were sold above the threshold. Soaring property prices has driven this far, far higher over the intervening six years, meaning IHT has potentially become an issue for many more people,’ said Gareth Shaw, head of consumer affairs at Saga Investment Services,.
‘In this context, the changes to the IHT rules, something Saga had long campaigned for, will benefit many who’ve built up larger estates thanks to the value of their home. These may not necessarily be wealthy people, but those who live in a property hotspot,’ he explained.
He highlighted that the research suggests widespread confusion about IHT with 42% of over 50s not knowing whether their property is worth more than the IHT allowance, and only 4% having taken any action to reduce the value of their estate for IHT purposes.
