Families pay record £5bn inheritance tax as house prices soar
INHERITANCE tax paid by British families has topped £5billion a year for the first time.
A record number of middle class families are being dragged into the tax as a result of soaring house prices in the South and stamp duty discouraging elderly people from downsizing, experts said.
In the year ending in May, £5.1billion was collected by HMRC through inheritance tax, a rise of 9 per cent on the previous year when £4.7billion was collected.
Despite house prices rocketing over the past 10 years, the inheritance tax threshold has remained the same since 2010.
Separate projections from the Office for Budget Responsibility (OBR) reveal the number of family estates on which inheritance tax must be paid has more than quadrupled since 2010, with the number up from around 10,000 to well over 40,000.
David Hollingworth, a property expert at mortgage firm London & Country, said: “If elderly people don’t downsize, they may pay more inheritance tax as more of their money will be tied up in their property, leaving them with less to give away. There are various reasons why people are not downsizing, a big one is the huge cost of moving, including stamp duty, and also the lack of suitable housing for retired people.”
At present estates worth up to £325,000 can be bequeathed without paying inheritance tax, with a rate of 40 per cent payable above the threshold. In April, the Government began introducing an additional tax-free allowance. By 2021 it will allow home owners to bequeath an extra £175,000 in property wealth. This means a new allowance for property owners of £500,000 – or £1 million for couples.