Inheritance tax DOUBLES in a decade to £5.4billion
Treasury take rockets as rising house prices snare more and more families
BEREAVED families were saddled with a record £5.4billion inheritance tax bill last year, figures revealed yesterday.
incredibly, the amount the Treasury takes from the tax each year has more than doubled in a decade.
rising house prices combined with a 10-year freeze in the inheritance tax threshold mean thousands more families are having to pay when a loved one dies.
inheritance tax is charged at a rate of 40 per cent on estates over a certain value. But the threshold at which it kicks in has been frozen at £325,000 since April 2009. it rises to £650,000 for couples.
The extraordinary scale of the tax grab on middle england was revealed in a report by Hm revenue & Customs yesterday.
Last night, one former pension minister warned how it had become a tax on middle-income households because wealthier families could often afford to employ financial advisers to find a way to avoid paying it.
The figures increase the pressure on Boris Johnson to shake up the fiendishly complex inheritance tax system, which was recently attacked in a report by the Treasury’s independent advisers, the Office of Tax Simplification.
HmrC’s latest figures show the Treasury raked in £5.4billion from the tax in the 2018/19 financial year – well over double the £2.4billion paid at the height of the financial crisis in 2009/10 when the housing market slumped.
The number of estates that incurred a charge after someone died has almost doubled in just seven years, rising from 14,700 in 2009/10 to 28,100 in 2016/17 – the most recent year available.
Former pensions minister Baroness ros Altmann said: ‘The intention of inheritance tax was that it would only hit the very wealthy... Those hit by the levy tend to be middle england households who often just own a home and would not consider themselves remotely rich or wealthy. With house prices going up, particularly in the South east, they have ended up falling into the inheritance tax trap.’
The average house price is almost £478,000 in London, and £320,000 in the South east. Huge numbers of families on modest incomes have been stung by the tax – simply because the home they bought decades ago has surged in value.
According to the report, 5,390 estates in London were hit by inheritance tax in 2016/17 – roughly the same as in the North east, North West, Yorkshire and the Humber, east midlands and Wales combined. in the South east, inheritance tax was charged on 6,430 estates in the same year.
reforms announced by former chancellor George Osborne in 2015 mean parents can pass on a home worth £1million to their children tax free from the start of the new financial year next April. experts last night called for a more radical overhaul to ensure middle income households are not hit by the tax.
Tom Selby, senior analyst at AJ Bell, said: ‘With the nil-rate band frozen at £325,000 for a decade, it is no surprise that HmrC continues to rake in record sums through iHT. As a minimum, the level of the nil-rate band should be looked at again and increased in line with inflation. ideally a more fundamental government overhaul of the iHT framework should also be undertaken, aimed at simplifying the structures for investors.’
rupert Wilkinson, partner at private client law firm Wilsons, said the tax is something ‘all home owners need to be concerned about’. He added: ‘it was intended to be a tax on only the very wealthiest estates, but if it continues on the same course it risks becoming a general tax on middle england.’
A Treasury spokesman said: ‘We think that only the very wealthiest in our society should be asked to pay inheritance tax.’
‘Stung as homes surged in value’