A record amount of estates paid inheritance tax in 2016/17, according to government figures.
More than 28,100 estates were liable for death duties in 2016/17 – a new high for the number of estates charged.
The latest figure represented a 15% rise on the previous year’s figure of 24,500 and continued the trend of year-on-year increases since records began in 2009/10.
The average tax on an estate in 2016/17 was £179,000, while the proportion of estates liable to inheritance tax increased from 4.2% in 2015/16 to 4.6% in those 12 months.
Total duties raised from inheritance tax also reached a new record of £5.4 billion during 2018/19, which represented a 3% rise on the previous year.
The nil-rate band has remained frozen at £325,000 since 2009/10, with tax deducted at 40% on the part of an estate that exceeds this threshold.
With the nil-rate band not being adjusted in line with inflation, more estates are falling into the inheritance tax net.
The residence nil-rate band can increase this threshold to £475,000 in 2019/20 if a family home is left to any children or grandchildren.
Changes to inheritance tax could well be afoot, with Chancellor Sajid Javid admitting that reforming the system is on his mind.
Speaking at an event staged by the Institute of Economic Affairs and the Taxpayers’ Alliance, Javid was asked if he would get rid of inheritance tax.
The Chancellor said:
“We’ve already made some sensible reforms to that tax, but I understand the arguments against it.
“When people pay taxes already through work or investments, capital gains or other taxes, there’s a real issue with then asking them to pay taxes all over again.
“Sensible changes have already been made but it’s something that’s on my mind.”
The Office for Tax Simplification has recommended reducing the current seven-year period at which tax may be due on gifts to five years, replacing various gift exemptions with a single allowance, and implementing a digital system.
We offer estate planning advice – please contact the team on 0161 761 5231 or email theteam@horsfield-smith.co.uk
