Her Majesty’s Revenue and Customs (HMRC) collected £4.7 billion in inheritance tax over the last financial year.
This is the largest amount of inheritance tax (IHT) taken by HMRC in the 30 years since the introduction of the current tax system. The figure represents a 22 per cent increase from the previous year, when IHT receipts totalled £3.8 billion, according to figures from the Office for National Statistics. Last year’s total was also a significant increase, with HMRC taking in 12 per cent more than it did the year before that.
Currently when a person dies, they can leave up to £325,000 of wealth to their loved ones without incurring any tax. Anything above that amount is taxed at 40 per cent. However, that will begin to change in 2017.
Houses make up “approximately a third of the total value of taxpaying estates” each year, the Office for National Statistics (ONS) reports. As a result, rising prices have led to more and more estates qualifying for IHT.
This will affect estates in London and the South East the most. According to the ONS, the average house price nationally is £211,230 whereas in London the average value is £472,163 which exceeds the current IHT threshold.
Even though the government has announced changes to IHT, the fact that these do not come into force until next year means that many estates will have to pay the old rate. Some have complained this is unfair to the loved ones of those who die before 2017.