Government makes record £5.2bn from inheritance tax

THE Government made a record £5.2 billion from inheritance tax receipts last year, according to new data released by HMRC.

Revenue rose by £388million on the year before, as a record number of middle-class families were dragged into the unpopular tax as a result of soaring house prices, experts said.

Despite house prices rocketing, the inheritance tax threshold has remained at £325,000 per person since 2010, meaning more estates are hit by the tax.

‘Much of the current tax workings are complex and distort behaviour and financial decisions’

Yesterday’s data does not illustrate the full impact of a new “residential” nilrate band introduced last year which is designed to eventually save thousands of people from paying the tax.

The new band applies to deaths on or after April 6 2017 and will allow individuals with children to pass on an additional £100,000 this year, with savings eventually rising to £175,000 over the next three years. By April 2020, couples will be able to pass on a family home worth £1million without paying any inheritance tax.

According to the Office for Budget Responsibility, the policy will eventually shave £1.5billion a year from the Government’s inheritance tax takings.

Danny Cox a spokesman at Hargreaves Lansdown, said: “The workings may be under review but the Treasury continues to reap the dual benefits of rising property prices and frozen allowances with another year of record inheritance tax receipts.

“Much of the current inheritance tax workings are complex and distort behaviour and financial decisions. The system is crying out for simplification. It’s an uncomfortable subject, but get to grips with the basics, and you could save your beneficiaries a fortune.”