The number of properties in the UK valued at more than the Inheritance Tax (IHT) threshold increased by almost 500,000 in the first half of 2004 with an estimated 2.4 million homeowners potentially liable to IHT as a result, according to estimates from Halifax Financial Services.

The maths is straightforward: the 12% increase in house prices in the first half of 2004 significantly outstripped the 3.1% increase in the IHT threshold in April from £255,000 to £263,000.

The biggest percentage rises in the number of properties valued above the IHT threshold in the first half of this year have been in Yorkshire and the Humber (49%) and the North West (46%), reflecting the strength of the housing market in the north. Indeed, more than 60% of the homes rising above the IHT threshold were outside London and the South East.

The lack of action by successive governments to link the inheritance tax threshold with house prices means that the Exchequer is benefiting from ever-increasing revenue from the housing market.

With 74% of homeowners with savings/investments saying that the equity in their home is their greatest asset, Halifax believes that homeowners should plan ahead to minimise the impact of IHT on their families.

Inheritance Tax

• Receipts from inheritance tax (residential property only) totalled £455m in 1992/93 and £880m
  in 2002/03.
• The inheritance tax threshold has increased 75 per cent from £150,000 in 1992/93 to £263,000 in 2004/05.
• During the same period house prices have increased 139 per cent.
• If the inheritance tax threshold had kept pace with house price inflation it would now stand at £359,000.
• The estimated number of properties now worth more than the Inheritance Tax threshold is almost five times greater than in 1997.