Inheritance Tax Payments Have Doubled in the Last Decade

In the past, inheritance tax would have been regarded by many only as something for the super-wealthy to have to think about.

But the amount the government has collected in inheritance tax has doubled in the last decade, as more and more people are becoming liable to pay the charge.

According to Treasury documents seen by the Mail on Sunday, total receipts from inheritance tax now stand at £5.4 billion – up from £2.7 billion in 2010.

This increase is set to continue, with forecasts suggesting annual inheritance tax receipts could reach £7.6 billion in the next five years.

These latest figures are likely to further the argument that the inheritance tax threshold isn’t keeping pace with wider changes in the economic environment and people’s personal finances.

The inheritance tax threshold currently stands at £325,000, and this tax doesn’t have to be paid if:

• You leave everything above the £325,000 to a spouse or civil partner.
• The value of your estate doesn’t exceed the threshold

The standard inheritance tax rate is 40%, and this is charged on anything in your estate that’s above the threshold.

However, house prices have risen dramatically in recent years, which factors into the total value of many people’s assets above £325,000.

In fact, the latest figures from Nationwide show that the average price of a home in the UK now stands at £260,230, following a record increase of £29,162 over the last year.

This was the biggest cash increase in property prices that Nationwide has observed since it began collecting comparable data more than 30 years ago.

The data also suggests that annual house price inflation is accelerating, rising from 11.2 per cent in the year to January to 12.6 per cent in the year to the end of February.

The Inheritance Tax threshold is frozen at £325,000 until April 2026. This means that if property prices keep on rising at the current rate, more people might be liable to pay inheritance tax than would have in years prior.

If you wish to discuss your financial situation with one of our advisers, please get in touch today.

The content of this factsheet is for general information only and should not be considered advice.  Information is based on our current understanding of tax legislation.  Tax treatment depends on individual circumstances and may be subject to change in the future.  Professional advice should always be sought prior to making any decisions or taking any action.  All details were correct at the time of writing. 

Sources:

https://www.thisismoney.co.uk/money/markets/article-10554785/Inheritance-tax-paid-families-doubles-decade.html

https://www.bbc.co.uk/news/business-60585947

https://www.gov.uk/inheritance-tax

Reference – BL142 – Mar – 2022