The majority of over-50s homeowners are more likely to downsize their home due to the freeze on inheritance tax brackets announced in the recent Budget.

In the Budget, Chancellor Rachel Reeves committed to freezing current inheritance tax thresholds for a further two years until 2030, meaning that inheritance tax is owed on estates valued at £325,000 or more, climbing to £500,000 for those leaving their home to their children.

Current inheritance tax thresholds have been in place since 2009. However, Reeves also announced that unused pension funds would be brought into inheritance tax from April 2027 which, in addition to the extended freeze, is likely to see more estates pulled into IHT thresholds as asset values increase in line with inflation.

A survey of over-50s homeowners, commissioned by Regency Living, found that 43% are already liable to pay inheritance tax due to the fact that the value of their home is £325,000 or more. However, this figure climbs to almost half (49%) when combining the value of their home and pension.

Despite this and despite the fact that current inheritance tax thresholds have been in place since 2009, only 9% had previously considered how to reduce the inheritance tax they might owe on their estate. However, following the Budget 97% of those surveyed said they would now look to reduce the level of inheritance tax they could be due to pay.

For a large number of over-50s homeowners, this means leaving their estate to a significant other. 29% said they would leave their estate to their spouse, potentially doubling their spouse’s IHT allowance tp £650,000 in the process. Meanwhile 26% said they would leave their estate to their children, meaning that their inheritance tax allowance would increase to £500,000. 

However, the majority of homeowners (35%) plan to take a more proactive approach whilst they are still alive by downsizing to a smaller home, releasing the equity built up in their bricks and mortar estate in the process – with our homes forming the majority of our estate for the average person.

Other common paths to reducing inheritance tax such as equity release lifetime gifting, trusts, charitable donations, and using life insurance to cover the cost were less popular amongst current over-50s homebuyers. 

A Regency Living spokesperson says: “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.

“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 enquiry 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.”