Inheritance Tax  

Number of estates paying IHT hits record level

Number of estates paying IHT hits record level

The number of estates liable for inheritance tax reached a record level in the 2016-17 tax year, latest official data has shown.

Figures published by HM Revenue and Customs today (September 19) showed the taxman levied IHT from 28,100 estates during 2016-17 (the most recent data available), 15 per cent up on the year before and a record number of estates charged.

The total number of estates paying IHT:

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Source: Wilsons

The average bill was £179,000 and the proportion of estates liable rose from 2.6 per cent in 2009 to 4.6 per cent in 2016-17.

Total funds raised from IHT receipts during 2018-19 also reached a record level, increasing 3 per cent year-on-year to £5.4bn.

Source: HMRC

IHT bills have been rising steadily since 2009-10 when the government froze the nil-rate band at £325,000. As the band hasn’t adjusted with inflation, more and more estates are falling into the net of IHT.

In fact law firm Wilsons estimated that had the threshold increased in line with inflation, the band would now be £432,000.

The figures also showed the amount the taxman had levied through IHT had more than doubled in the past nine years.

Tom Selby, a senior analyst at AJ Bell, 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. Ideally a more fundamental government overhaul of the IHT framework should also be undertaken, aimed at simplifying the structures for investors.”

Hargreaves Lansdown’s personal finance analyst Sarah Coles described the past decade as a “bonanza for the taxman” due to property and share price growth.

She said it was vital consumers considered IHT as they got older and took sensible steps to avoid paying more than they had to.

Rupert Wilkinson, partner at Wilsons, agreed, adding that IHT was a tax “all homeowners need to be concerned about”.

He said: “The IHT threshold needs to rise if the tax is to remain limited to the very wealthiest estates as originally intended.”

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