Estates liable for inheritance tax in the UK in 2012 to 2013 faced an average bill of more than £170,000 each – an increase of almost £5,000 or 3 per cent, according to new analysis of HMRC data by Prudential.
The latest publicly available data on tax receipts shows that the 2012 to 2013 tax year saw inheritance tax paid on 17,900 estates with a total bill of £3.05bn – a 15 per cent increase on the £2.65bn total paid in the previous tax year.
According to Prudential the figures do not, however, suggest an increasing proportion of estates are becoming liable for inheritance tax.
HMRC reviewed nearly 280,000 estates in the 2012 to 2013 tax year.
Inheritance tax was paid by 6 per cent of estates, a figure that remained relatively flat over the course of five years but is much less than in 2007 to 2008 when more than 9 per cent of estates were liable for inheritance tax.
Prudential’s analysis also confirmed London and the south east remain the UK’s inheritance tax hotspots – between them they accounted for half of all inheritance tax payments in the 2012 to 2013 tax year.
Of all the estates above the £325,000 threshold, and therefore liable for inheritance tax, 42 per cent were from London and the south east.
The average inheritance tax bill was also higher in London than anywhere else in the country, with the average amount paid per liable estate totalling almost £236,000 – 38 per cent more than the national average.
Les Cameron, a tax specialist at Prudential, said: “As the total amount of inheritance tax paid increases, so does the value of careful tax planning for anyone looking to cascade as much of their wealth to their families as possible.
“Planning for inheritance tax is at its most valuable when it is done early and has become increasingly important with the additional options and complexities brought about by the new rules allowing individuals to pass on pension savings to family members.”
In the Summer Budget the chancellor announced that from April 2017 individuals will be entitled to a family home allowance in addition to the existing £325,000 inheritance tax allowance.
The family home allowance will be phased in and will be up to £1m for a married couple or civil partnership by the 2020 to 2021 tax year.
Under the pension freedoms that came into force in April 2015 individuals now have the freedom to pass on their unused defined contribution pension to any nominated beneficiary when they die without paying the 55 per cent tax charge previously applied to pensions passed on at death.
If the individual dies before they reach the age of 75, they will be able to give their remaining defined contribution pension to anyone as a lump sum completely tax free, if it is in a drawdown account or unvested.
