THE Shadow Chancellor, George Osborne, said this week that, under the Conservatives, “only millionaires will pay death duties”. His remarks were of particular interest to a fast-growing section of the electorate. When the Tories were last in power, in the first quarter of 1997, there were 104 sales of houses worth more than £1 million in England and Wales, according to the Land Registry. In the same period this year there were 1,806, a 17-fold rise. The property boom under Labour has created a generation of accidental property millionaires, many of whom are forced in later life to sell their homes to avoid imposing a punitive inheritance tax burden on their children.

Under the Tory proposals, the inheritance tax threshold would be raised from £300,000 to £1 million, knocking £280,000 (40 per cent of £700,000) off the tax bill for £1 million-plus homeowners. Will these now choose not to sell and instead, in time-honoured fashion, leave their homes to their children when they die?

Estate agents seem to think so. “The majority of people, even in Central London, would not be forced to sell property to pay tax,” says Ed Mead, of Douglas & Gordon. Edward Pell, of Cluttons, believes that “there may well be an increase in homeowners making improvements to properties that are just under the £1 million mark, and passing them on to their children as opposed to selling them.” Max Ziff, of The Humberts Group, agrees: “The money saved by a family with a £1 million estate could be ploughed back into the property market, but many family homes would be retained that before would have been sold for death duties.”

Families seeking £1 million-plus homes in London will now have to consider whether the house that tempts them will be an attractive investment for future generations. The wealthier among them may be considering the two most expensive houses on the market in Rich-mond-upon-Thames, an area of London popular with high-earning nesting couples. Both are six-bedroom Victorian villas priced at £5.5 million, and both have been extensively redesigned to provide luxurious contemporary living space.

One is on Mount Ararat Road, one of the smartest roads in Richmond Hill, the exclusive central area of the borough, where neighbours include Mick Jagger. The owner, an artist with three children, bought the semidetached four-storey house nine years ago and spent four years transforming it with the help of a New York architectural firm, Selldorf. “This was a wholesale gut-out job,” says Patrick Glynn-Jones of Savills, the estate agent. The interior (5,000 sq ft) was replaced with a new layout: glass-walled rooms face onto a central staircase with a mahogany handrail, polished oak stairs and solid brass railings that reflect the sun. The grey stone floor-tiles were reclaimed from a monastery in the Philippines, and the bright green basement includes a pool, sauna, steam room and gym. Like the rest of the house, it is wired for sound. Next door is a nanny flat with a separate entrance. On the ground floor, a drawing room designed to display art is next to a large marble kitchen/dining room with a formidable display of stainless steel appliances.

“His and hers” studies face each other at the top of the stairs on the first floor, lit by an arty row of naked bulbs. The master bedroom is lined with beautiful mahogany wardrobes inlaid with wicker panels. The bed, with a huge headboard full of drawers, is fixed to the middle of the floor, and the en-suite is all mirrors and black and white marble. On this floor and the next are a further four en-suite bedrooms and a sitting room lit by a skylight. The well-ordered garden has fruit trees and fragrant box hedging.

You get an extra 1,500 sq ft of space for your money a short hop over the Thames, in Cambridge Park in Twickenham, where an architect, Euan Borland, has spent two years turning the second house into a bold hybrid of traditional and modern. He started by pulling it apart and taking the roof off, so the only original parts are the walls. “In many cases the new traditional features are of a much higher standard than the originals”, he says. These include new panelling, cornicing, ceiling roses and parquet floors in the two large front rooms and library (which will look out on to a hot tub in the garden).

The sinks in the en-suite bathrooms upstairs have massive limestone surrounds carved out of single chunks of stone. The master en-suite has a showerhead consisting of concentric rings embedded in the ceiling. On the lower ground floor lurks a gym, with en-suite steam room, and a cinema room lit by pink and blue fibre optic lights; linking the two is a bar with illuminated glass shelves, hidden behind wood panels. The house is automated, so the doors, heating, curtains and music are controlled by mobile phone. Borland’s pièce de résistance is a cavernous kitchen/dining room at the back, with two glass walls overlooking the garden. At one end is a gold-tiled kitchen lined with stone work surfaces and sinks and yet more shiny steel machines. A staircase leads to a staff flat. Via one of the glass walls you walk out to a decked area with a sliding glass roof, handy for a rainy barbecue. The garden is tiny but spectacular, with blue lights, a “fire feature” and 5,000 shrubs.

Borland has spent more than £4 million on the project. “This is a statement house for an important person with an important job and a big family,” he says. The sort of person who will doubtless be voting Tory and hoping to keep his or her home in the family.

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TAXFILE

Anyone who owns an estate worth £300,000 or more – 2.3 million UK households – must surrender 40 per cent of it to the taxman when they die.

Since 1995-96, house prices have risen by 199 per cent, more than double the 95 per cent increase in the inheritance tax (IHT) threshold; if the threshold had increased in line with house prices, it would now be £460,000.

The Government collected £3.5 billion from IHT revenue in 2006. It predicts this will rise to £4 billion in 2007-08.

Some couples opt to own their home as tenants in common so it does not automatically pass to the other owner on death; then when one spouse dies, by making a gift to a trust equal to the IHT threshold, the surviving spouse reduces the size of their estate.

You can also give away as much as you wish using “potentially exempt transfers”, which will not count towards your estate as long as you live for seven more years. Sources: Halifax, HMRC

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