Inheritance Tax  

Experts warn of rising IHT payments

Experts warn of rising IHT payments
 

Inheritance tax receipts dropped slightly in April this year, as experts warn the rate is likely to rise over the next year.

Some £507mn of IHT was paid last month, down from £585mn in March, but higher than the £497mn paid in April last year, according to figures from HM Revenue and Customs.

However, experts have warned that rising property prices and a freeze on IHT thresholds will further impact families.

Andrew Tully, technical director at Canada Life, said the tax is continuing to prove itself as a valuable income stream for HMRC.

Inheritance tax paid in past 12 months

MonthIHT

April 2021

£497mn

May 2021

£469mn

June 2021

£539mn

July 2021

£571mn

August 2021

£576mn

September 2021

£488mn

October 2021

£466mn

November 2021

£500mn

December 2021

£474mn

January 2022

£443mn

February 2022

£448mn

March 2022

£585mn

April 2022

£507mn

 Source: HM Revenue and Customs

“[The rise in recent years] will partly be driven by the ongoing increase in house prices, as residential property makes up the largest share of most estates. 

“There has also been a higher volume of wealth transfers due to Covid – partly due to more deaths in the elderly population, but also as some people make outright gifts to help family during this difficult period.”

The nil rate band is currently set at £325,00 and the residence nil rate is at £175,000, both of which are frozen until at least April 2026.

Alex Davies, chief executive of Wealth Club said it is no wonder so many more households are being pushed over the IHT threshold with the pace of property prices rising.

“It’s now believed that the average family impacted by inheritance tax will face an average tax bill of £200,000,” he said.

“There are perfectly legal and legitimate ways to reduce your inheritance liability with a little careful and early tax planning."

Liz Ritchie, partner at Mazars said IHT planning isn't something that can be looked at once and ticked off the to-do list.

"To make sure you are making the most of your allowances, they must be reviewed regularly with your tax adviser. 

"It is also important to work with a financial adviser, one that you trust and feel has your best interests at heart, to make sure you are using allowances efficiently and that you feel confident about your financial situation.”

sally.hickey@ft.com