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New data shows inheritance tax bill increase
According to new analysis of HM Revenue & Customs (HMRC) data, the cost of passing on wealth to the next generation has increased by three per cent or £5,000 in one year.
The analysis by Prudential has revealed that in 2012/2013 – the latest year for which information is available –the British population paid more than £3 billion to the Treasury in inheritance tax (IHT).
During this period the average death tax bill rose almost £5,000 in a year to £170,000, despite the fact that only 17,900 (six per cent) of the 280,000 estates reviewed paid IHT. The majority of people who paid IHT were from the South of England, with London and the South East accounting for half of all IHT payments in the year. According to HMRC figures, the average inheritance tax bills among those in London were much higher at almost £236,000; 38 per cent more than the national average IHT payment.
The areas with the most significant growth in IHT payments however, were Northern Ireland and the North East of England, with the average IHT bill climbing 25 per cent and 10 per cent respectively. Scotland and Wales saw a decline in IHT with the average bill in Scotland dropping almost nine per cent and in Wales by five per cent.
However, changes to IHT rules to help families pass on their home without paying additional tax could signal a big change in the amount of money HMRC receives from estates.
During the Summer Budget, the Chancellor George Osborne announced that from April 2017 individuals will be entitled to a family home allowance in addition to their existing individual £325,000 inheritance tax allowance.
This new allowance will be phased in over the coming years and will allow married couples or those in civil partnerships to pass on a property worth up to £1 million tax free by 2020/2021.
Link: Inheritance Tax Data