Inheritance Tax goes through the roof with record high announcement
A recent report published by the HMRC has found that inheritance tax (IHT) has reached an all-time high of £5.2 billion.
This is an increase of 8%, which equates to £388 million when compared to the IHT paid in 2016-17 and has been steadily rising since 2010.
In terms of IHT, the HMRC will remember the winter of 2014/15 as they saw a rise of 22% in IHT from the year previous; an increase contributed by the unprecedented cold weather that claimed an additionally estimated 43,900 lives in 2014/15. However, the continued rise since 2010 is a direct cause of economic growth and rising house prices.
Currently, the nil-rate system, which has been set at the same rate since 2010, allows a person’s estate to be worth £325,000 before IHT is claimed; this rises to £650,000 for married couples and any person widowed. However, the band has failed to take rising house and share prices into account meaning more estates could be liable to pay inheritance tax over the next few years.
Within the report, the government revealed that the net value of estates rose by £17 billion between the financial years 2009/10 to 2015/16; 54% being an increase in residential property. Further indicating that IHT is set to rise again over the coming years as property values continue to increase.
The Office for Budget Responsibility (OBR) believe, “The effect of continued growth in asset prices is partly offset by the rising path for the main residence nil rate band from 2017/18 onwards,”
This could indicate a relief for many estates as the government have also introduced the resident nil-rate band (RNRB), which currently allows parents an additional £125,000 on the value of their estate if they are passing property onto their children.
This allowance will rise to £150,000 in 2019-20 and £175,000 in 2020 to 2021.
What seems certain, in the current system, is a continued rise in IHT with the OBR confident that inheritance tax receipts will increase as a share of GDP by 2022/23.
Do you think the current system fairly taxes estates? Or, is an overly complicated system unfairly punishing families at their most vulnerable?