Six times as many Birmingham homes could be burdened by inheritance tax freeze, research reveals
A house bought in Birmingham in 2024 is six times more likely to result in families being hit by inheritance tax than in 2009, when the levy was first frozen at £325,000 – research by law firm Shakespeare Martineau has revealed.
Analysis of the Land Registry’s price paid data[i] shows that in 2009, 3 per cent of all property purchases (284 out of 8,663) in Birmingham cost £325,000 or more. However, in 2024, this rose to 20 per cent (1,623 out of 8,004).
Out of all the regions in England and Wales, Wales[ii] experienced the largest growth over the past 15 years, with 18 per cent of properties sold in 2024 costing £325,000 or more, compared with 4 per cent in 2009.
The East Midlands came second in the list (22 per cent in 2024 compared with 5 per cent in 2009), followed by the East (49 per cent in 2024 versus 13 per cent in 2009 each).
Julia Rosenbloom (pictured), private wealth tax partner at Shakespeare Martineau, said: “With property values steadily rising and the inheritance tax threshold frozen until at least 2030, more families are facing significant tax bills when passing down wealth.
“However, there are several strategies that can help mitigate this burden.
“Making use of tax-efficient structures such as trusts or family investment companies can ensure assets are passed down in a controlled and tax-effective manner.
“Additionally, gifting during one’s lifetime and considering charitable donations can all reduce overall inheritance tax liabilities.
“The government has demonstrated its commitment to increase revenue from inheritance tax through changes announced in the October 2024 budget, which included the introduction of an inheritance tax charge on pension pots from April 2027 and restrictions on business reliefs.
“There is still a huge menu of options for tax planning though, and anyone with a potential inheritance tax liability should take specialist tax and legal advice to ensure they are making the best of their situation and maximising the available reliefs and exemptions.”
Inheritance tax is paid if a person’s estate – including their property, money and possessions – is worth more than £325,000 when they die. The rate of inheritance tax is 40 per cent on anything above the threshold.
In the latest financial year (2023/24), inheritance taxes raised a record £7.5 billion for the Treasury – 5.6 per cent more than the previous year (£7.1 billion).
If the main home is being left to children or other direct descendants such as grandchildren, people can take advantage of the residence nil-rate band, introduced in 2017, which will increase the threshold by £175,000 – taking the tax-free allowance to £500,000.
However, the number of properties that were purchased for £500,000 or more in Birmingham in 2024 also increased when compared with 2009 (7 per cent versus 1 per cent), according to the Land Registry’s price paid data.
Lesley Davis, private client partner at Shakespeare Martineau, said: “As estate values continue to rise while the inheritance tax threshold remains static, there is more for families to fight over.
“Additionally, it provides an incentive to leave a greater proportion of the estate to charity to benefit from a reduced rate of inheritance tax or a spouse or civil partner as those gifts will not attract inheritance tax. Despite being a tax-efficient thing to do, it can create more disputes.
“There are several ways to pass assets down the generations that can be achieved during lifetime to mitigate the tax paid upon death.
“For example, making lifetime gifts – whether through direct financial support or placing assets in trust – can significantly reduce exposure while ensuring wealth is passed down on your own terms.”
