IHT liabilities reach highest level on record

HMRC revealed that IHT liabilities reached £5.76bn over the 2020 to 2021 tax year, surpassing the previous peak of £5.05bn that was recorded in the 2016 to 2017 tax year.

This new peak was stimulated by a "significant" increase on liabilities when compared to the previous tax year, as detailed by Quilter tax and financial planning, Rachael Griffin.

She stated: "This rise in IHT tax liabilities, amounting to £5.76bn, represents a significant 16 per cent increase compared to the previous year, making it the largest single-year rise in IHT tax liabilities since 2014 to 2015."

HMRC reported this increase in liabilities was due in part to the rise in the number of overall deaths in the UK over that tax year, which resulted in a knock-on rise in taxable wealth transfers.

It found that the number of deaths in the UK rose by 18 per cent, from 612,000 to 722,000, a rise that was attributed, at least in part, to the effects of the Covid-19 pandemic.

While deaths increased over the tax year, the percentage of deaths resulting in an IHT charge decreased, falling by 0.03 percentage points from 3.73 per cent to 3.7 per cent.

The research also found that the number of estates paying inheritance tax rose by 17 per cent over the 2020 and 2021 tax year when compared to the previous tax year, increasing from 23,000 in the 2019 to 2020 tax year to 27,000.

Elsewhere, the research said that the largest exemption set against assets continued to be for transfers between spouses and civil partners.

It detailed that £15.7bn was transferred to surviving spouses and civil partners on death, a rise of £2.7bn (21 per cent) on the previous tax year.

The value of exempted transfers to qualifying charities also increased, rising to £1.8bn in the tax year 2020 to 2021 from £1.6bn in the previous tax year.

tom.dunstan@ft.com

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