A survey from Regency Living found that most homeowners over 50 were likely to downsize their homes to avoid Inheritance Tax (IHT), following the freeze on IHT thresholds announced in the Autumn Budget.
In the Autumn Budget, Chancellor Rachel Reeves confirmed that the current IHT thresholds will be frozen until 2030.
This means Inheritance Tax is owed on estates valued at £325,000 or more, and £500,000 for those leaving their home to their children.
The thresholds have remained unchanged since 2009.
From April 2027, unused pension funds will fall under Inheritance Tax, which could pull more estates into the tax bracket as asset values rise with inflation.
The survey revealed that 43% of homeowners over 50 were already liable for IHT based on their home value alone; this number rose to 49% when including pension value.
Despite these figures, only 9% of respondents had previously considered reducing their possible Inheritance Tax liability.
However, after the Autumn Budget announcements, 97% of those surveyed indicated they would now look for ways to lower their IHT exposure.
For many over-50s, this means leaving their estate to their spouse; 29% planned to do so, potentially doubling their spouse’s IHT allowance to £650,000.
Additionally, 26% would leave their estate to their children, which would provide them with a £500,000 allowance.
The majority of homeowners (35%) planned to downsize to a smaller home to release equity and reduce IHT liability.
Other methods like equity release, lifetime gifting, trusts, charitable donations, and life insurance were less favoured by current over-50s homebuyers.
Tim Simmons, sales and marketing director at Regency Living, said: “Despite the fact that current inheritance tax thresholds have been in place since 2009, the vast majority of mature homeowners have given little thought to the bill they could be hit with when it’s time to pass on their estate.
“However, the recent Autumn Budget has once again put a spotlight on inheritance tax and not only have we seen thresholds frozen until 2030, but we’ve also seen the housing market put in a very strong performance so far this year, so it’s understandable that many homeowners may now be more aware of their current position.
Simmons added: “Interestingly, whilst many plan to utilise existing loopholes that allow greater levels of tax relief when passing on an estate to a spouse or child, a greater number are taking a proactive approach by planning to downsize their property.
“In doing so, not only will they stand to pay less in inheritance tax but they can also enjoy the equity accumulated within their bricks and mortar home for later life.
“It’s a win-win situation in this respect and it’s a driving factor that we see amongst many park home buyers, as they look to streamline their financial affairs whilst making the most of their later years.”
