London households at risk from Labour reversal on inheritance tax

 
Helen Cahill
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Central London House Prices Set To Fall Post-Brexit
Labour is bringing the threshold to below the London average house price (Source: Getty)

Labour party proposals that could see a reduction of the inheritance tax threshold would risk nearly half of London's families being hit by the levy, the Tories have claimed.

The proposal is set out in an appendix to the Labour manifesto which suggests "reversing tax giveaways on capital gains tax, inheritance tax, bank levy and scrapping the married persons’ tax allowance".

This means families may be forced to pay a 40 per cent tax rate on the value of a deceased relative's home if it is worth more than £425,000.

According to analysis of Land Registry transactions by the Conservative party, more than half (51 per cent) of London's homes, or 1.8m households, could become liable for the inheritance tax under Labour leader Jeremy Corbyn's plans.

Read more: London house price growth among slowest in the UK

In Islington, where Corbyn is standing in the election, three out of four families may have to pay the tax. However, the proportion of families affected rises to 85 per cent in Hammersmith and Fulham and 92 per cent in Kensington and Chelsea.

If house prices rise in line with inflation, then, in five years' time, 61 per cent of London homes (2.1m properties) would be hit by the property tax. However, house price growth in different parts of the capital varies greatly, making projections difficult. Annual house price growth in the capital is now just 1.4 per cent, and therefore lower than inflation, which has jumped to 2.7 per cent.

The Conservatives intend to increase the threshold from £850,000 to £1m by 2021, meaning the number of London homes affected will fall from 14 per cent to 10 per cent, unburdening more than 135,000 households from the tax.

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Gavin Barwell, Minister for London, said: "Jeremy Corbyn wants to hit family homes with a bombshell of new taxes. London will bear the brunt of his nonsensical plans to hike up inheritance tax.

"Ordinary Londoners who have worked hard all their lives, saved and improved their homes will find their families hit with punishing death taxes. Under Corbyn, it will be pay as you earn, and pay as you die."

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