Homeowners can also benefit from a residence nil-rate band of £175,000 on top of the nil-rate band, if they are passing their primary home to a direct descendant.
This threshold has increased with inflation since it was introduced in 2017, but the Chancellor last year announced that it will be frozen until 2026. This means there will be no allowance for the fact that in April, house prices climbed year-on-year by 12.4pc.
Julia Rosenbloom, of Evelyn Partners, a wealth management service, said: “Given that the nil-rate band and residence nil-rate band have been frozen until at least April 2026, many more will fall into this tax trap.”
Mr Sunak has also frozen the thresholds for income tax, capital gains tax and the pensions lifetime allowance, costing taxpayers thousands in a phenomenon known by economists as fiscal drag.
The inheritance tax is frozen until 2025-26, meaning a family paying tax on a £600,000 estate will pay £13,500 more by the end of the period than they would if it had risen with inflation.
The fresh calls for tax cuts came as HMRC data showed that the difference between the total amount of tax expected and that which is actually paid, was £32bn in 2020/21.
Failure to take reasonable care, criminal attacks, non-payment and evasion were among the main reasons for the “tax gap” in 2020/21 in terms of behaviour.
In terms of customers, small businesses were responsible for nearly half of the tax gap, at around £15.6bn, according to HMRC’s data.
Criminals accounted for £5.2bn of the gap, while medium-sized businesses made up £3.9bn and large businesses accounted for £3.6bn.
HMRC’s publication excluded estimates of error and fraud in the Covid support schemes.
The latest estimate from the Business Department is that, in total, £4.9bn of taxpayers’ money will be lost to Covid fraud.
The scale of the fraud has already led to the resignation of Lord Agnew in January. He said the management of fraud during the pandemic had been “nothing less than woeful”.
David Fell, of Hamptons, said: “As a crude rule of thumb, a rate rise of one percentage point today exerts about twice the pressure on mortgaged household finances as the same rate rise would a decade ago.
“The sale of house price growth and mortgage debt taken on by households means that fairly limited base rate rises by historical standards have the ability to add significant pressure onto household finances.”
Bank Rate rises today will also have a higher impact because buyers have become accustomed to ultra-low rates. For the last 13 years, the Bank Rate has been below 1pc. The move into a higher interest rate environment is likely to have a much bigger impact on market sentiment, particularly in the context of the cost of living crisis, when buyers are seeing bills for food, energy and fuel soar.
The Bank Rate would need to rise to 7pc to have the same impact on household finances as the 17pc Bank Rate recorded in November 1979, Hamptons found.
With a 7pc Bank Rate, the average first-time buyer would have to spend 66pc of their monthly salary to cover a mortgage on an average home. At the peak of the Bank Rate in 1979, the share was only 63pc.
Lewis Shaw, of Shaw Financial Services, a mortgage broker, said: “We have a generation of homeowners that have never seen a typical base rate or the mortgage rates that flow from them. This means their frame of reference will now need to adjust and we all know that can be difficult.”
A major UK law firm is reviewing its office space in London’s ‘Walkie Talkie’ skyscraper as home-working habits persist following the pandemic.
Manchester-based DWF, which is the UK’s largest listed law firm, has hired a consultancy to review its property footprint after deciding that Covid has permanently changed working habits, according to sources.
The review could include slashing the number of desks it currently occupies at its London headquarters in The Fenchurch Building, dubbed the Walkie Talkie, which was once crowned Britain’s ugliest building.
The firm, which has 30 offices globally, moved into the building in 2014. At the time, it took out almost 43,000 sq ft of space, leasing all of the 32nd floor and part of the 31st – enough for its staff at the time with further capacity for future hires.
DWF, which is run by legal veteran Sir Nigel Knowles, remains one of the few listed law firms in Britain after rival Mishcon de Reya abandoned its long-anticipated plans to float on the stock market earlier this month.
Its potential downsizing comes as companies across the country are considering reducing or closing expensive office space, as few workers settle back into full-time office life more than two years after the first lockdown.
A study published earlier this month found that most Londoners believe they will never return to the office full-time, with six-in-10 staff in the capital still working from home at least once a week.
Ex-government adviser Mark Kleinman, a professor of public policy who worked on the study, said he was surprised that respondents showed such an “attachment” to home working “regardless of politics, age [and] seniority” as well as personality type, with little difference between introverts and extroverts.
The research, from the Policy Institute and King’s College London, also found that few agree with Boris Johnson’s criticism that working from home is inefficient because people wonder “very slowly to the fridge, hacking off a small piece of cheese” and forget what they were doing. Just 16pc of people agreed that home workers don’t work as hard as those who commute in.
Electric vehicle infrastructure is relatively well-developed in central London, but in the suburbs the shortfall is acute. While in Westminster there are 2.5 electric vehicles for every public charging point, in Dacorum in Hertfordshire, the ratio is 57. Similarly in Elmbridge, Waverley and Mole Valley in Surrey, the respective ratios are 51, 46 and 45.
Lucian Cook, of Savills, said places where electric vehicle ownership greatly outnumbered charging points would see the biggest impact on home values.
He said: “As the gap between demand for electric cars and public charging points grows, we can expect to see homes that offer private charging provisions to come at a premium.”
Charles Davenport, of Knight Frank estate agents’ in Elmbridge, said off-street parking was becoming a deal-breaker for buyers with electric cars.
He said: “We had a house in Cobham and the couple looking at it had an electric car and they said sorry we can’t because there is no off-street parking and it is absolutely essential for us.” The biggest charger shortfalls are all in the extended London commuter belt in the South of England. Other hotspots include Tandridge and Woking in Surrey, as well as Reigate and Banstead, St Albans and Sevenoaks.
In two years, the combined number of electric cars has surged by 176pc, while the number of charging points has increased by only 72pc.
At the end of 2021, there were 14.75 electric vehicles for every charging point across the UK, compared to 6.35 at the end of 2019.
Thousands of homes near the New Forest and Chilterns have been blocked by new rules that ban building because it might increase the number of people walking in the nearby countryside.
About 15,000 homes near the New Forest have been put on hold by advice from Natural England, the Government’s nature adviser, that they are likely to increase visitor numbers.
The block, which was introduced after a Government-backed report, has been copied in the Chilterns, stopping plans to build a further 20,000 homes.
Councils in Winchester and Dorset are considering similar moves based on Natural England’s advice, and housebuilders fear the phenomenon could spread across Britain, putting on hold plans for thousands more new homes.
A report by Government-funded consultants found that a development of homes in six boroughs within 8.5 miles of the New Forest could increase the number of visitors and dog walkers. Conservationists say more walkers could threaten populations of birds such as the Dartford warbler and nightjar.
Natural England elected to extend the block to nearby Fareham, contrary to the advice from consultants, prompting the council to complain.
“Preventing these new homes being built because some of their owners might visit national parks and forests 14km from their new homes clearly defies all logic,” a spokesman for the Home Builders Federation said.
“We face an ever-worsening crisis of housing affordability and a difficult economic outlook, so giving anti-business quangos and their consultants carte blanche to scupper investments and threaten livelihoods seems particularly unwise right now.”
Allison Potts, of Natural England, said. “[Our] role is to help local authorities take into account the potential environmental impacts of the proposed developments, when reaching a decision on planning permission.”
Buy-to-let yields have hit a record low, fuelling fears that property investors will sell up. Landlords could soon turn a loss as higher interest rates bite, while the Government’s buy-to-let tax crackdown further amplifies the pain of soaring mortgage costs.
Nationally, gross rental yields are already at a record low of 4.38pc. This is because house prices have climbed more quickly than rents.
Research consultancy Capital Economics has forecast that by the end of 2022 yields will hit a new low of 4.26pc. As interest rate rises push up landlords’ outgoings, next year the margin between rental income and mortgage costs will become the most squeezed it has been since the financial crisis.
The Bank of England’s decision to increase the Bank Rate to 1.25pc will cause the average net profit on a new buy-to-let property to fall by 15pc for a landlord who pays higher-rate tax, according to Hamptons estate agents.
In London an investor who pays higher-rate tax will see their net profit fall by £840 a year – 29pc less than before the rate rise.
“It will only take the Bank Rate to reach 2pc before the average landlord on higher-rate tax would see their profit more than halve,” said Aneisha Beveridge of Hamptons.
Capital Economics has forecast that the Bank Rate will hit 3pc next year, but a typical buy-to-let will be loss-making much sooner.
An average landlord on the higher rate of tax will see their investment turn a loss if the Bank Rate hits 2.75pc. At this point, a typical buy-to-let mortgage rate would be 4.11pc, meaning they would lose £97 per property per year. At 3pc, their annual losses would jump to £403.
London landlords will be hit hardest, said Ms Beveridge. “Here, profits would fall by 59pc if the Bank Rate rose to 1.5pc,” she said. If interest rates rise to 2pc, a typical London landlord will lose £501 a year per property. At 3pc, the yearly loss would be £2,180.