Inheritance tax take hits new high

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A new HMRC report has revealed that inheritance tax receipts hit a record high of £5.2bn over the last financial year, increasing 8% (£388m) year-on-year during 2017/18.

The report, released ahead of an OTS review of inheritance tax (IHT) rules, found that the net value of estates has increased by £17bn to £79bn since 2009, while the number of estates liable for IHT has continued to climb, with factors such as rising property prices bringing more people into the regime.

The total number of liable estates has increased every year since 2009-10. In 2015-16 there were 24,500 liable estates, an increase of 1,300 since 2014-15.

While last year's 8% rise is less than the 22% increase seen from 2014-15 to 2015-16, receipts have been steadily climbing since 2010-11.

In 2015-16, 4.2% of UK deaths were liable to IHT, an increase of 0.3% since 2014-15. This has steadily increased since 2008-09 – something the Revenue puts down to the freezing of the nil rate band (NRB) at £325,000 since April 2009.

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The report shows that London and the south east have the highest numbers of estates passing on death which are liable to IHT. In 2015-16, 51% of the total IHT liability was concentrated in these regions alone, with the average taxpayer in London clocking up a liability of £223,000 per estate.

The lowest IHT-paying regions were Northern Ireland, with an average of £127,000 per estate, and the North East of England at £132,000. The report partly attributed this to lower house prices and decreased population density, leading to a lower number of deaths.

Potential probate fee rise

Commenting on the figures James Hender, head of private wealth at Saffery Champness, raised a warning about the spectre of a rise in probate fees.

“Recent analysis by the Office for Budget Responsibility suggested that inheritance tax receipts in the last year - 17-18 - began with a significant uptick,” said Hender. “This was, according to the OBR, due to people looking to obtain probate (for which the payment of IHT a precondition) in advance of a proposed hefty rise in probate fees.

“While the proposed probate fee increase never materialised, the ripple effect may still be seen in future IHT receipt announcements. Going forward, the plans for increased probate fees cannot be ruled out as all government departments are looking for new ways to raise funds.

“At the same time we are awaiting an update from the Office of Tax Simplification on possible reforms to the inheritance tax regime – so change may be coming. Apathy can be a real issue with regard to wills and legacies, and taxpayers should be looking to ensure their wills are up-to-date and that they, and their beneficiaries, are able to make the most of the reliefs that are available.”

In January this year, the Chancellor wrote to the Office of Tax Simplification (OTS) to commission a review of Inheritance Tax. This had the dual aims of checking that the system is fit for purpose and discussing proposals for simplification.

Charitable giving discount

This year also saw the highest number of estates claiming the 4% discount for charitable giving (2,020), saving a total of £350m. Although this was a rise of over £50m on the previous year, Hender pointed out that the number of estates claiming the discount still accounts for less than 10% of total liable estates.

“When Chancellor, George Osborne famously pledged to make legacy giving the new norm,” said Hender, “but this still has some way to go with many wills not updated after the new relief was introduced and taxpayers still often unclear as to the reliefs available to support giving.”

About Tom Herbert

Tom is editor at AccountingWEB, responsible for all editorial content on the site. If you have a story that might interest us or wish to comment on the site's coverage get in touch via the site's private message function or Twitter DM (@AWebTom)

Replies

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07th Aug 2018 16:31

I always tell my clients that there is no reason why anyone should pay IHT. It's a waste of your hard earned cash and your savings going back poss years. The government will only spend it within minutes of receiving.
I think that the IHT take for HMRC is only just building. In a few years time all those taxpayers who have put their money in property rather than savings will die and without IHT planning help the tax man will take more than his share as property values rise.
Of course one way round this is to do as I intend. I have no children so apart from making sure husband has the main PPR and one other property rental income everything else is going to the Donkey Sanctuary in Sidmouth and RNLI

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By vstrad
to Jennifer Adams
08th Aug 2018 12:18

Good for you, Jennifer. I've visited the Donkey Sanctuary and it's lovely. And as an ex-Royal Navy man, I've always supported the RNLI. Two good choices!

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By keithas
to Jennifer Adams
08th Aug 2018 15:19

That's assuming that you don't have to spend all your capital on care home fees in your old age.
Perhaps the government could spend a higher IHT take on funding care homes and, thus, end this "lottery".

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to keithas
09th Aug 2018 12:09

AMEN

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to Jennifer Adams
08th Aug 2018 18:06

Surely if you croak you leave an estate to hubby which is exempt. Nil tax payable. He then has £650000 nil rate band if he croaks

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to Jennifer Adams
08th Aug 2018 18:36

I adore animals

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07th Aug 2018 16:55

I'm surprised more people don't just simply marry (or do a civil partnership with) their young relatives per this link (and then do an IPDI with wide powers of appointment etc.):
https://www.telegraph.co.uk/finance/personalfinance/tax/10745009/The-des...

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08th Aug 2018 17:57

My aunt Doris has a net estate of £900,000 . She expects to remit from her estate £100.000.tax. her deceased hubby has donated his £325000 nil rate band and she has no direct relatives.
I am her trusted consultant. She does not qualify for main residence nil rate band £100000.

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08th Aug 2018 18:01

Doris feels obliged to the public purse

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08th Aug 2018 18:01

Doris feels obliged to the public purse

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08th Aug 2018 18:01

Doris feels obliged to the public purse

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08th Aug 2018 18:12

This tax redistributes wealth at a time your status is dust.
It's a good tax

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08th Aug 2018 18:29

Most people who have paid their due liability to tax will be under the £325000. So not in the frame. IHT is a good tax

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to Mrbailey
08th Aug 2018 20:18

I understand that the 1% wealthiest in the UK pay 30% of the tax take. surely they have the right to do what they want with the balance .
Not hand over another 40% of their gross worth .
Good job there are some straight thinking accountants out there.
Many wealthy individuals also help a lot of people along the way in life,doesn’t always have to be about wealth.

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to cjdraper
09th Aug 2018 12:03

Surely the nil rate band threshold is good when you consider many people in Midlands and the North have modest homes and modest incomes.
We live in a welfare state and have a progressive tax system.
When you look at the taxable income bands they too seem fair.
I don't understand obsession with wealth and capital when life is so short.
I know a bloke who went to jail for £2 million tax fraud - he has a £1 million home and big Mercedes car and he is not a contented man.
Wealth and status are sad pursuits.

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to cjdraper
09th Aug 2018 13:04

" Straight thinking accountants " - agents must apply interpretation and adherence to the law and be mindful of their societal public allegiance and also client duty.

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08th Aug 2018 18:30

All fine if you have no children, but as a divorced father of three not many reliefs.
One finds it hard to accept giving it to a donkey gets you all the reliefs but the children get just 60% having had a lot of heart breaking decisions of which assets to sell. These assets then stop producing income tax , very short sighted on be half of the government in my opinion.
Plus what happened to the 10% and 20% band.
Nothing fair about IHT.
I love animals also.

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to cjdraper
08th Aug 2018 18:44

We live in a social democratic welfare state. Tax pays for this amalgam of welfare - police doctor ambulance defence schools etc. We must chill out.
It's a lovely tax

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08th Aug 2018 18:53

The tax in its current form makes sense.
Life is about health and happiness and we rent a lifetime space for 70 years.
Money material obsession is no good

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08th Aug 2018 19:14

Most people who have paid their due liability to tax will be under the £325000. So not in the frame. IHT is a good tax

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