According to statistics published by HMRC, the Treasury fetched a record high of £5.2 billion in inheritance tax receipts last year.
Inheritance tax receipts increased 8% year-on-year in 2017/18 to continue a long-term trend, which began when the nil-rate band was frozen at £325,000 with effect from the 6 April 2009. Since then, inheritance tax receipts have grown by an average of 10% a year, with the latest increase £388 million higher than in 2016/17.
It’s thought that rising property prices have been a contributing factor to the ongoing rise in inheritance tax receipts – with house prices soaring above the rate of inflation over the same period. However, the most recent statistics don’t take into account the full impact of the residence nil-rate band (RNRB), which was introduced on the 6 April 2017 in addition to the £325,000 nil-rate band.
Eligible estates qualify for an extra £125,000 through the RNRB in 2018/19 if the deceased owned a home, or a share of one, that was included in their estate and left to their direct descendants. It enables someone to pass on a family home worth £450,000 without incurring inheritance tax liabilities in 2018/19 – and will increase a further £25,000 in each of the next two years.
Steve Webb, director of policy at Royal London, said:
“The amount of money raised from inheritance tax has doubled in less than a decade and a steadily rising proportion of estates are now caught within the inheritance tax net. Even the introduction of an additional nil-rate band for families passing on a home to their children was not able to stem the growth in inheritance tax revenues, yet it remains riddled with anomalies.”
“Inheritance tax is a complex tax, and the sooner it’s overhauled, the better.”
Sean McCann, chartered financial planner at NFU Mutual, agreed:
“We’ve seen in recent years a more aggressive approach from the taxman that has driven a surge in inheritance tax receipts. Simplification of this can’t come soon enough for many families, but taking financial advice should be a priority for anyone with a potential inheritance tax problem.”
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