Inheritance tax is creating friction in the home buying market and making the housing crisis worse, building societies have said.
A report has found that Britain’s property tax system is “ineffective” and incentivising older homeowners to keep living in homes they no longer need.
Mortgage lenders are calling on the Government to review inheritance tax, criticising tax breaks on family homes worth £175,000 per person. They say these tax breaks are encouraging homeowners to remain in larger homes in later life to capitalise on the allowances, but said they could be reformed to free up homes and help younger buyers onto the property ladder.
Paul Broadhead, head mortgages and housing policy at the Building Society Association (BSA), which authored the report, said: “We want the Government to remove as much tax friction as possible at the point of sale, to improve liquidity in the market and free up more stock.
“If you’ve got a large estate and a potential tax liability, this incentivises owners to remain in larger homes.
“These, of course, aren’t necessarily first-time buyer homes. But introducing more liquidity into the market allows families to keep moving up and down the [property] ladder and this – in turn – does free up more first-time buyer homes.”
The Telegraph’s campaign to scrap inheritance tax has been widely backed by MPs.