DaveCinzano
WATCH OUT, GEORGE, HE'S GOT A SCREWDRIVER!
I would also have to add Paperhouse. OK it's more suspense/creepy rather than outright horror, but there are a few moments which would make anyone's hair stand on end.
Definitely - one of the best British films of the 80s, and terrifying in a completely non-gore way.
White Of The Eye - only seen it once but it left a lasting impression of intense, seedy creepiness.
http://www.imdb.com/title/tt0094320/
David Keith makes me feel very uneasy when I watch that.
Night of the Comet is another good one. The start reminded me of Dawn of the Dead remake and 28 Days but shot in middle-class America
Ooh, that's rather a fun one, isn't it?
As for underrated horror flicks not yet mentioned, how about Suture, that black and white one with Dennis Haysbert waking up in a hospital? More thriller than terror, but still very spooky.
Dellamorte Dellamore is a sweet little film about a sexton-cum-zombie slayer (Rupert Everett) who falls in love in inappropriate circumstances.
For slightly broader laughs and shudders, how about Street Trash, which is sort of a social satire on tramp juice-style strong liquor, with The Stuff-type SF elements.