In 2009, the average house price was £157,200. This is of course lower because of the global financial crash, but even in 2007 the average value was £176,758.
This meant that the value of the average UK home was comfortably below the NRB, which meant that ordinary families would not be liable to pay IHT. However, when we compare these to the government's statistics on house prices in May 2022, the average UK house price was £283,496, which is creeping nearer to the NRB threshold.
In certain regions of the country, the average house price has already outstripped the NRB. In London, the average price was £526,183, and in the south east the average price was £388,531. Many ordinary families from these regions are therefore starting to be caught in the IHT net by virtue of their family home.
After the introduction of the RNRB, the number of estates paying IHT did decrease, but those who are not able to benefit from the RNRB (those without children, for example) are unable to benefit.
This might go some way to explain why the number of estates subject to IHT decreased in 2017-18 and 2018-19, but the average tax paid by those who are caught is increasing.
Further, the statistics below show that the number of estates being caught in the IHT net is beginning to creep up again.
The tax-free allowance will therefore continue to be eroded, meaning more ordinary families will be liable to pay IHT, and the average IHT bill will continue to increase; both of which come at a time when soaring inflation means that ordinary families can ill afford it.
Kyra Motley is a partner at Boodle Hatfield