Inheritance tax grab continues to soar

Landlords and property owners are helping to push up the inheritance tax grab with news that in the three months to July, the Treasury raked in £300m more than they did last year.

And that has led one financial expert to say that inheritance tax (IHT) is ‘no longer the preserve of the rich’.

The Treasury enjoyed inheritance tax receipts of £2.4 billion in that quarter and Shaun Moore, a tax and financial planning expert at Quilter, said: “The inheritance tax take continues to rise and is proving to be more and more lucrative for The Treasury.

“No longer is IHT the preserve of the rich and many estates are having to pay the tax simply because of their property wealth, this is particularly evident in the southeast. The average house price across the whole of the UK is only around £40,000 below the Nil Rate Band.”

‘Long-awaited slowdown in property prices’

He added: “Although house price data shows that a long-awaited slowdown in property prices might be on the cards in the near future due to a lack of housing stock in the UK, property prices may remain high simply because of the laws of supply and demand.”

When the value of an estate or someone who has died is lower than £325,000, normally there’s no inheritance tax to pay.

However, there’s a standard IHT tax rate of 40% above the tax-free threshold and this is for an estate that includes money, property and possessions.

Property prices have rocketed

That threshold has not changed since April 2011, but property prices have rocketed since then.

This means growing numbers of homeowners are set to pay more tax when they die.

Between April 2019 and 2022, the average price of property rose by £149,129 which means that it’s not just millionaires who are having to stump up IHT – anyone who has seen a rise in the value of their property will also need to pay.

‘Incredible spike in receipts’

Andrew Tully, the technical director at Canada Life, said: “After the incredible spike in receipts the previous month, IHT levels have returned to slightly more familiar territory.

“The value of the tax is still just as important as it delivers £300 million more than the same period of time the previous year.”

He added: “This is a tax that is no longer just affecting the very wealthy in society and is increasingly catching out families who are unprepared or simply unaware.

“The frozen thresholds mean that HMRC has already doubled its tax take from IHT over the last 10 years.”

He says that the surge is being partly led by rising house prices since residential property makes up the largest share of most estates.

Higher volume of wealth transfers

Mr Tully also points out that 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 a result of higher asset values.

He said: “The legacy from the pandemic may mean more people are open to discussing estate planning with family.

“Good planning can help to reduce or mitigate IHT so it’s essential to get expert financial advice for tax efficient ways to pass wealth onto loved ones.”

Share This Article