'One third' of homes face 40% tax

It is claimed half of London homes could be over the threshold

One in three UK homeowners will now be subject to a 40% inheritance tax, research suggests.

The survey by Scottish Widows bank claims 8.2m people - 34% of homeowners - have assets worth more than the £275,000 threshold for the tax.

The survey of over 2,000 homeowners found most were unaware of the limit and 73% of those liable for the tax had done nothing to lessen the bill.

The government is expected to earn £3.4bn in inheritance tax this year.

The threshold is scheduled to rise to £300,000 in the tax year 2007/08.

Anne Young, tax expert at Scottish Widows, said: "For many people it is possible to cut or even completely avoid Inheritance Tax Threshold (IHT) with just a few simple steps. The first and most obvious of which is to make a will.

Top areas for tax 1 Windsor & Maidenhead 2 Surrey 3 Buckingham 4 Greater London 5 Wokingham

"Inheritance tax is levied at 40% - planning now could save thousands."

As well as making a will she recommends leaving property in a trust of some kind.

The average household wealth now stands at £258,000, according to the study.

The wide regional variation in house prices mean that the tax affects people in London and the south-east in particular.

Other study

Scottish Widows estimates that almost half of homeowners in London and over a third in the rest of the south of England are over the threshold.

By contrast 23% of homeowners in the north and 15% in Scotland are over the threshold.

The results were based on census figures, data from the Land Registry and a survey of 2,294 homeowners.

A similar study by the Halifax bank in November claimed that the tax would be payable on 2.1 million homes.

The bank claimed that 12% of all privately owned homes were worth more than the tax threshold, rising to 50% of homes in London and south-east England.