Inheritance tax increasingly affecting the middle-class
MIDDLE-CLASS families are increasingly losing out to inheritance taxes, as last year saw 30 per cent more people being hit with the duty.
The tax take reached £5.4billion in the 2020-21 tax year. This figure is up £190million, and is £33million below the highest tax intake ever, official figures published yesterday showed.
Almost 33,000 people are thought to have been hit, up by almost a third from 25,000 in 2019-20, according to forecasts from the Office for Budget Responsibility. Concrete figures on the number of people forced to pay last year have not yet been published.
The tax haul is expected to reach an all-time high of £6billion next year, thanks to mounting Covid-19 deaths, booming house prices and a five-year freeze in tax protections.
The Government will make an additional £1 billion by 2026 by keeping the £325,000 inheritance tax threshold at its current level. The tax-free allowance has not risen since 2009, despite house prices rising by about 60pc in that time.
Commentators said the Government was profiting off the back of the pandemic. Shaun Moore, of Quilter, a financial adviser, said soaring mortality figures and “the tragic loss of life” would “benefit HM Treasury”. “It is a tax charge that was designed for the wealthiest in society, but increasingly more and more of the middle classes are being brought into its grasp,” he said.
John Stevenson, a Conservative MP in the all-party parliamentary group on inheritance tax and intergenerational fairness, said: “It is unfair the overall burden falls on the middle section of society, rather than the richest.”
Research has shown that millionaires are able to pay a lower effective rate of tax on their death by putting money into investments that attract tax relief, while average families with most of their wealth in family homes pay more.