Death duty hits £4.6billion as house prices rise

THE amount that George Osborne collects in inheritance tax will exceed £4billion for the first time this year as more middleclass families are forced to pay it as a result of rising house prices.

The death duty take is on track to be more than a fifth higher than last year, also boosted by a rise in the number of pensioners dying of flu.

Figures published by the Office for National Statistics show the Chancellor is expected to rake in £4.6billion from inheritance tax for the 12 months to February, compared with £3.8billion over the same period in 2014/15.

Experts have warned of growing resentment among middle-class savers being forced to pay the ‘devious’ death duty.

Currently, estates worth up to £325,000 can be passed on without incurring inheritance tax, but above this a rate of 40 per cent is charged.

The threshold is changing in April next year, when an additional tax-free allowance will eventually allow homeowners to bequeath an extra £175,000 in property wealth. This means a new allowance of £500,000, or £1million for couples.

Mr Osborne announced the policy in last year’s summer Budget to lift thousands of middle-class homeowners who want to leave their properties to younger family members out of inheritance tax.

However, figures from the Office for Budget Responsibility suggest the number of families being hammered by it is soaring in advance of the change. The inde- pendent spending watchdog believes the total will exceed 40,000 this year.

Separate projections indicate that the number of family estates on which the death duty must be paid has quadrupled since 2010.

The OBR said more people have been hit by inheritance tax this year because of sharply rising house prices. Average year- onyear growth accelerated to 5.7 per cent last year with the typical home now worth more than £200,000, according to Nationwide research.

Death duty receipts were also boosted by a spike in winter deaths among older people last year. As a result, the Treasury said it was expecting to net an extra £200million more than expected.

Justin Urquhart Stewart, of Seven Investment Management, a stockbroker, said: ‘When the biggest benefactor of your estate is going to the Chancellor, that tends to grate on people.

‘Inheritance tax is a devious tax which discourages family wealth. For the ludicrously wealthy, it makes no difference at all, but for families who have worked hard to achieve reasonable success its effects can be life-changing.’

Alan Miller, of SCM Direct, a wealth manager, said: ‘Families paying now and just missing out on the higher allowances have every right to feel resentful.’

The Treasury said: ‘We recognise that more families are being pulled into the inheritance tax net than ever before, with the number set to double over the next five years.

‘That’s why we’re reforming the rules to bring down the number of families paying inheritance tax.’

‘Inheritance tax is devious’