Inheritance Tax Payments On The Rise – £5 Billion Paid In 2018
According to the most recent statistics by HM Revenue and Customs (HMRC) Inheritance Tax (IHT) receipts hit a record high of £5.2 billion in 2018.
This is an increase of £400 million on the figures from a year earlier. Receipts for the six month period between April and December found that the IHT paid was only 0.4% higher that in the same period in 2017. This was attributed to unusually high IHT paid in April and May of 2017.
These statistics mean that inheritance tax payments have increased by over £1 billion since 2014/15 where only £3.8 billion was paid.
Furthermore, NFU Mutual have predicted that within the next year this figure will increase by over £1 billion to £6.5 billion.
Concerned with soaring house prices that have the potential to place estates into eligibility to pay inheritance tax, anxious people are looking to find ways of ensuring their assets are protected from the tax.
In an effort to combat this issue, the government have made changes to the resident nil rate band (RNRB). When a property is left to immediate family, an additional £125,000 is added to the estate before any IHT is applicable. This figure is set to rise to £175,000 by 2020/2021.
When this figure is applied to a couple’s allowance, the threshold could increase to £1 million before IHT is applied.
However, despite these changes, the government have enjoyed the impact that rising property prices have had on the amount of tax they are able to accrue.
The report also tracks the journey of IHT from 1994 to the present day. The severity of the financial crash in 2008 was clear to see in the findings. The reduction in property prices during 2009, led to IHT contributions dropping from £3.8 billion in 2007 to £2.8 billion in 2008 and £2.4 billion in 2009.
The government will be hoping they can avoid similar dips following the uncertain Brexit outcome in March.
Catherine Desmond, a partner at Smith Cooper, said: “IHT can be notoriously complex to navigate, meaning some families are disadvantaged if they do not seek reliable and timely advice.
“It is vital that individuals take the necessary precautions to manage their IHT exposure and that they are fully advised and take advantage of all the allowances and reliefs available.
“Forward planning can make the difference between paying a large amount of IHT and potentially paying little or none in some cases.”
What impact will this sustained increase in IHT have on grieving families?