Millions Of Unsuspecting Estates On Brink Of Inheritance Tax Threshold

Following a decade of consistently rising house prices and favourable pension schemes, around 1 million people aged over 60-years are teetering on the precipice of an Inheritance Tax (IHT) black hole.

Unbeknown to the estate owners, increasing equity in property has left a mass of people on the brink of IHT liabilities.

Whilst the government predict that the number is loitering around 1 million people, NFU Mutual have speculated this figure is closer to 1.4 million UK estates valued at somewhere close to or in excess of the current threshold of £325,000.

Despite attempts to increase the threshold through an additional nil-rate band of £150,000 offered to singletons planning to gift their assets to their children and a combined couple allowance meaning that estates over £1 million can be offered tax free to surviving children, the government are making record sums of money from IHT contributions.

Last year, the Government raked in over £5.3 billion in IHT alone. HM Revenue and Customs (HMRC) and OBR (Office for Budget Responsibility) forecasts have speculated that this figure will increase by an additional billion pounds over the next five years.

Estimates suggest that the government will accrue a similar figure to 2018/19’s haul throughout this year.

By 2020/21 the forecast indicates that IHT contributions will increase to £5.4 billion, rising by £200 million to £5.6 billion the following year.

In 2022/23, this will rise to £5.9 billion and by 2023/24, the total will exceed £6.3 billion.

In part, the naive and unsuspecting estates lingering around the threshold, who may not have the wherewithal to plan for inheritance tax, could well be massive contributors to this excessive haul.

It has been suggested that the government should be doing more to educate sections of society that could be liable to pay inheritance tax because of the increased equity that has built up in their homes.

Duncan Simpson, The Research Director at Taxpayers’ Alliance, commented:

“Ultimately the overwhelming majority of states aren’t liable or rather subject to inheritance tax. But it’s a growing portion. This year it is forecast to be £5.3billion.

“It’s going to stay roughly around that sort of level and then increase in a few years time, or at least according to the latest OBR (Office for Budget Responsibility) forecast.

“So, it is a big chunk of cash which HMRC receives from inheritance tax.”

Are the general public offered enough guidance on inheritance tax matters? What should be done to encourage more people to plan for IHT? 

Today's Wills and Probate