Inheritance tax receipts double in a decade

UK citizens paid £5.4bn in inheritance tax (IHT) in 2018/19, up 3% increase on the previous tax year, new HMRC figures have revealed.

This means the amount HMRC raised through IHT charges has more than doubled in the past nine years, from less than £2.5bn in 2009/10.

The latest statistics available showed that 28,100 UK deaths resulted in an IHT charge in 2016/17. The proportion of estates liable for IHT has been steadily rising since the nil-rate band was frozen in 2009 – up from 2.6% that year to 4.6% in 2016/17.

The data also found that the average amount of tax paid per estate was £179,000 in 2015/16, while nearly three-quarters of last year’s £5.4bn was collected from estates worth £1m or more.

AJ Bell senior analyst, Tom Selby, said: “With the nil-rate band frozen at £325,000 for a decade, it is no surprise that HMRC continues to rake in record sums through IHT. The world of inheritance tax is painfully difficult to navigate, and while the wealthiest should be able to afford suitable advice to take advantage of the various exemptions and reliefs available, those who can’t risk being caught out.

“As a minimum, the level of the nil-rate band should be looked at again and increased in line with inflation” he advocated. “Ideally, a more fundamental government overhaul of the IHT framework should also be undertaken, aimed at simplifying the structures for investors.”

Hargreaves Lansdown personal finance analyst, Sarah Coles, added: “A decade of property and share price growth has been a bonanza for the taxman – and he doesn’t let a little thing like death stand in the way of dipping into your pockets for a little bit more.

“The freezing of the inheritance tax threshold for a decade has trapped thousands more people into paying tax when their loved ones die. So as we get older it’s vital to consider inheritance tax, and take sensible steps to avoid paying more than we have to.”

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