IHT analysis shows 6% increase year on year

The financial services firm NFU Mutual has revealed findings of research into inheritance tax (IHT) and regional divisions. NFU Mutual’s analysis found that there were 22,100 deaths in 2018/19 which resulted in an IHT bill, with an average total of £209,502, an increase of 6% from £197,521 in the previous year.

The figures highlight a significant North-South divide in IHT, with 64% of tax revenue coming from estates in the South East, London, East of England, and South West, while a further 10% comes from the East and West Midlands. This means that all northern regions, Wales, Scotland and Norther Ireland account for just 25% of the total IHT revenue.

Londoners paid the highest IHT in the country with an average bill of £271,820, while those in the North West registered the lowest average IHT at around £152,898.

Averages across the rest of the country were around £155,963.30 in Wales, £195,798.32 each in Scotland, and £158,730.16 in Northern Ireland, according to the data.

But the number of estates impacted by IHT is expected to increase as the Chancellor Rishi Sunak has frozen the level at which people start paying IHT for a further five years to help pay the Covid-19 bill, NFU Mutual warns. This means the nil-rate band will remain at £325,000 and the residence nil-rate band at £175,000 until 2026.

Sean McCann, chartered financial planner at NFU Mutual, commented:

“Inheritance tax is feared by many but paid by relatively few. But with the average bill in excess of £200,000, it can make a significant dent in a family’s wealth for those that do get caught in the net.”

“With the tax-free allowances frozen for the next five years, rising asset prices and a heated housing market, a growing number of families will be impacted. It’s critical that families concerned about being caught by inheritance tax seek advice as early as possible,” he added.

Because of this, a recent survey by The Open Partnership found that 60% of advisers expect demand for IHT planning to rise over the coming year, as more families seek advice about mitigating against IHT rules.

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