Inheritance tax hits all time high
Inheritance tax (IHT) hit an all-time high of £4.7 billion in 2015-16, according to research by Wilsons, the private client law firm.
This figure is up 17% on that recorded in 2014-15, and 91% on 2009-10, the year in which the IHT threshold was last raised.
From 2017, the Government will phase in a new £175,000 Residential Nil-Rate Band. The new allowance will be set at £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20, and £175,000 in 2020-21.
The band will then increase in line with the Consumer Price Index. It will be available in addition to the existing £325,000 IHT threshold, which will be fixed until the end of 2020-21. Both allowances can be transferred to a spouse or partner.
Wilsons said that for the £325,000 threshold to have kept pace with inflation since 2009, it would have had to rise to £391,000.
IHT now makes up 0.87% of all tax receipts in the UK, compared with 0.57% in 2009-10.
Tim Fullerlove, Partner at Wilsons, said: “Inheritance tax is gradually becoming a general tax on ‘Middle England’, and the longer it goes on, the harder it will be for the Treasury to let that income go. With each passing year, more and more and more middle-class estates are passing the IHT threshold, and are being penalised by a tax that was never intended for them.
“The Residential Nil-Rate Band is a welcome boost for married couples looking to pass on the family home to their children, but it has left those without children, and those who do not own their own property, in the lower division of a two-tier inheritance system.”