RegulationAug 1 2014

Research reveals IHT ignorance as tax take hits £3.4bn

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More than £3.4bn was paid to the Treasury in inheritance tax during the past tax year, marking a 9 per cent increase on the £3.1bn that was taken by the government in the 2012/2013 financial year, according to figures published today (1 August) by HMRC.

Commenting on the data, NFU Mutual said that rising house prices have helped “push up the number of households paying [the] tax and are creating new IHT hotspots around the country”. It cited in particular Richmond Park in London, Chichester in Surrey and Beaconsfield in Buckinghamshire.

According to data published earlier this week by the Land Registry, the average house price in England and Wales now stands at £172,011. This rises to a staggering £437,608 in the capital, emphasising the regional disparity.

However, NFU said that a survey of 4,000 adults carried out in April found that most could not identify the current IHT threshold or the tax rate that would apply on the amount above this minimum, showing the potential opportunity for advisers in this space.

The nil-rate band for IHT will remain unchanged at £325,000 until 2019, when it is set to increase to £329,000. If a person’s estate passes to their spouse there will be no IHT charged on this transfer and the allowance is similarly inherited, creating an effective couple’s threshold of £650,000. A 40 per cent tax charge is applied to everything above these minimum levels.

According to NFU, just 24 per cent of respondents were able to identify the £325,000 nil-rate band and the 40 per cent tax charge that subsequently applies. The firm said that based on current rates of increase, areas such as Maidenhead, Putney and Beckenham are future ‘hotspots’ facing potentially greater IHT bills in the future.

Click here to read FTAdviser’s Guide to Inheritance Tax Planning, and earn 60 CPD minutes.