Inheritance tax receipts increased by £165m last month, according to HM Revenue and Custom’s latest data
In March 2019 IHT receipts accounted for £537m, up from £372m in February 2019, showing a growth of 44 per cent.
Rachael Griffin, tax and financial planning expert at Quilter, said: "Receipts for April 2018 to March 2019 are 3.1 per cent higher than the same period last year and the 2018-19 tax year show that IHT receipts are at its highest level both in annual revenue and as a proportion of GDP.”
In 2018-19 IHT receipts totalled £5.4bn, up from £5.2bn the previous tax year, with the amount of IHT collected by HMRC having continuously increased from 2009-10. There was a sharp drop in IHT receipts from 2008-9 due to both the introduction of the transferable nil rate band for deaths occurring from October 2007 and a fall in the value of residential property in the second half of 2008 and in 2009.
The nil rate band, also known as the IHT threshold, is the amount up to which an estate has no IHT to pay. Unused NRB and residence nil rate band can be transferred to a surviving spouse or civil partner. The NRB for 2019-20 is £325,000, any estate which exceeds this threshold is charged 40 per cent in IHT.
The RNRB came into effect in 2017 and is an additional threshold available where the deceased left a residence, or the sale proceeds of a residence, to their direct descendants. The RNRB for 2019-20 is £150,000 an increase of £25,000 from 2018-19.
Ms Griffin said: “We may see the tax take fall somewhat next month as the government increased the RNRB to £150,000, which gives people an additional threshold before IHT becomes due on their estate and which they say will remove some of the IHT sting.
“However, research from Big Window for Quilter shows that despite the RNRB being in effect since 2017, just 41 per cent of people are aware of this complicated part of the IHT landscape.”
The fact that individuals have to be asked which allowances are available to them is a worrying sign, says Ms Griffin. “It is made worse by the woefully low proportion that are aware of them. Government claims that it has given the public all the tools it needs to navigate this tax system, but it’s as complex as assembling flat pack furniture with instructions written in a foreign language,” she said.
The residence nil rate band is set to increase annually by £25,000 every April until 2020, when it reaches £175,000. After that it will increase every year in line with inflation, measured by the Consumer Price Index.
Ms Griffin said: “In the modern world families are increasingly becoming more complex and we need a tax regime which functions with this in mind. The RNRB depends on a number of factors, including your marital status and who inherits the family home. These kinds of rules should be rethought so people have the freedom to gift to whoever they want and are not constrained by antiquated societal rules. A simple IHT regime gives people far greater opportunity to best plan their estates and make the most difference to future generations.”