Inheritance Tax Receipts Jump

Inheritance tax payments in the year to April jumped by 14%, to £6.1bn, as rising asset prices boosted estate values. The increase was the largest since 2015-16 when receipts rose by 22% according to HMRC, as it disclosed the figures this week.

Tax experts attributed the rise largely to increasing property prices, bringing into the inheritance tax net, families who previously would not have been caught by IHT claims. The effects are magnified by the government’s decision to freeze the nil rate band - the level at which no tax is paid, and the residence nil rate band - the extra allowance given on a main home.

As a financial adviser, I think the freeze is certainly achieving the ‘fiscal drag’ it set out to, particularly given the rise in asset prices in the past couple of years since the peak of the pandemic.

The total number of UK deaths that resulted in an IHT charge also increased. In separate data for the 2019-20 tax year, HMRC said there were 23,000 such deaths, up 4% on the previous year. HMRC’s data also highlight the large scale of tax relief generated from two key concessions: agricultural property relief (APR) and business property relief (BPR). These reliefs covered assets worth £2.8bn in 2019-20. This was a fall of £700mn, 20%, compared with 2018-19. However, it still represents a significant amount when set against total IHT receipts of £5.2bn in 2019-20, especially as the benefits are concentrated among wealthier families with significant assets beyond the main home. Separately, tax-exempt gifts to charities totalled £1.6bn.

If you would like to discuss IHT planning and how we can help, contact your Prosperis adviser.