Grieving families hit with £5.2bn tax bill

BEREAVED families paid a record £5.2billion in death duties in the last year, official figures revealed yesterday.

The 2017-18 inheritance tax haul was up £400million on the previous year on the back of soaring house prices and a booming stock market.

But the introduction of the new “family home allowance”, which lets couples pass on £850,000 tax-free, is set to see the Government taking a smaller cut of family wealth.

In April 2017 a new additional allowance of £100,000 was introduced for when a family home is passed directly to children or grandchildren.

Known as the “residence nil-rate band”, it will increase annually until it reaches £175,000 in April 2020.

By then a couple will be able to pass on £1million without paying inheritance tax.

Rachael Griffin, tax expert at Old Mutual Wealth, said: “The inheritance tax haul hitting record highs is somewhat unsurprising, given the nil-rate band was fixed and stopped increasing in line with inflation.

“Since then house prices have gone up, which has had the effect of boosting HMRC’s tax take.”

The threshold for paying inheritance tax has been frozen at £325,000 since 2009.

Everything above is taxed at 40 per cent.

That means some people with a family home to pass on become higher rate taxpayers for the first time on their death. If the threshold had gone up in line with inflation it would have been £414,000 in 2017, a rise of 27 per cent.

Not using the allowance, for example by leaving a family home to a sibling instead of to children or grandchildren, sees the taxman take an even bigger chunk of the estate.

HMRC said it was doing all it could to make people aware of the nil rate band. Earlier this year the Government announced plans to overhaul the death duty system.