Figures released by HMRC today show that they collected a record £4.7 billion in Inheritance Tax (IHT) payments during 2015/16 – a massive 22% increase on last year’s figures. The country’s IHT bill is the highest since the introduction of the current taxation system 30 years ago.
The dramatic rise in payments has been blamed on increasing property values which have pushed the value of ‘ordinary family’s’ estates above the current IHT threshold, which stands at £325,000 for an individual and £650,000 for a couple.
The thresholds have remained unchanged since 2009, despite consistent increases in property values, particularly in London and the South East. This has meant that an increasing number of middle class families have been ‘dragged’ over the threshold and are therefore subject to 40% tax. The figures reinforce this trend, with families in the region responsible for generating nearly half of HMRC’s IHT revenues.
Changes to IHT legislation are due to be introduced in 2017 and will theoretically increase the nil-rate band, the value of an estate that is not subject to IHT, to £1m for property owning couples.
However, critics of the new rules argue that they are overly complicated and will cause greater confusion for families and advisers alike.
Speaking about the announcement, Tom Curran, CEO of estate administration specialists Kings Court Trust, said; “Inheritance Tax will always be one of the most contentious issues that a family has to deal.
Even relatively straightforward estates can be subject to IHT and the thought of having to deal with complicated tax issues so soon after the loss of a loved one is too much for many families to consider.
We help thousands of families deal with estate administration each year and a high proportion of them tell us that handing over the tax work to a specialist to deal with is a huge relief.
It’s just one of the ways we reduce the burden on them at a difficult time.”