Inheritance tax payments hit new record high

Inheritance tax (IHT) receipts are rising at an ‘alarming rate’, hitting £5.3 billion over the past year to the end of February, new figures show. This is a record high, representing a rise of 13% year on year. The record sums in tax receipts put pressure on chancellor Phillip Hammond to follow through on plans to reform the system. In late January, Mr Hammond ordered a review of IHT to address complexities, although there was no mention of an increase in the IHT threshold, which has remained at £325,000 since 2009.

Rising property prices

The static IHT threshold along with rising property prices have been the main factors behind an increasing number of individuals having to pay IHT. To address the latter issue, the government started phasing in the residence nil-rate band (RNRB) in April 2017. Under the RNRB, married couples or those in civil partnerships will eventually have an extra £350,000 worth of IHT-free allowance per couple. This will be fully phased in by the 2020/21 tax year and IHT receipts are expected to decrease thereafter. The new allowance started at £100,000 per person in the tax year 2017/18 and will rise to £125,000 in 2018/19. It will then increase to £150,000 in 2019/20 and £175,000 in 2020/21. Torsten White, a partner at Wilsons, the law firm, called the new IHT figures “alarming”.

"Alarming rate"

“Substantial portions of individuals’ wealth are now being taken by HMRC through IHT. The value of that IHT, somewhat worryingly, continues to rise at an alarming rate,” he says. He adds: “No one wants their children or other dependants to have to pick up hefty inheritance tax bills, so it is important to plan ahead as early as possible how to pass wealth on to children and grandchildren". If you leave part of your estate to charity in your Will, then it won’t count towards the total taxable value of your estate. You can also cut the Inheritance Tax rate on the rest of your estate from 40% to 36%, if you leave at least 10% of your net estate to a charity. Find out more about making a Will and leaving a gift to charity. Source: Moneywise