New research has indicated that inheritance tax paid by British families has reached an annual total of £5 billion.
From the final data collection, before the new threshold was introduced in April, the figures revealed the highest figure ever recorded, largely due to growing house prices in the South. Paired with the higher stamp duty deterring would-be downsizers, this has led to a greater number of people having to pay the tax.
In the 12-month period to May 2017, HMRC collected £5.1 billion in Inheritance Tax receipts. Compared to the previous year when £4.7 billion was collected, this indicated a growth of 9% over the same amount of time.
The threshold of £325,000 has remained the same since 2010 despite the rapid increase in house prices over the last decade. This has caused the number of people to be affected by the tax to rise.
Over the past seven years, the number of estates where inheritance tax is due has grown from around 10,000 to over 40,000, according to separate forecasts from the Office for Budget Responsibility.
Commenting on the change in figures was David Hollingworth. The property expert at London & Country highlighted the impact that a reduction in downsizers has had, stating: “If elderly people don’t downsize they may pay more inheritance tax as more of their money will be tied up in their property, leaving them with less to give away.
“There are various reasons why people are not downsizing, a big one is the huge cost of moving, including stamp duty and also the lack of suitable housing for retired people.”
In April 2017, the New Residence Nil-Rate Band (RNRB) was introduced, increasing the current IHT threshold to £425,000 for individuals who are passing on their main residence to direct descendants. This will grow by a further £25,000 each year, rising to £175,000 by 2021.
For couples, therefore, this will amount to a combined allowance of £1 million when passing on property wealth.
However, campaigners have called for compensation to be awarded to those who have paid inheritance tax in the past two years, in light of the length of time the changes have taken to be implemented by the Government.
