Inheritance tax paid by British families has topped £5bn a year for the first time in history, the final data before new allowances were introduced in April (2017) reveals.
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.
Families with recently deceased relatives have narrowly missed out on new, higher limits which will eventually let them inherit homes worth £1m tax-free.
In the year ending in May 2017, £5.1bn was collected by HMRC through Inheritance Tax receipts, a rise of 9 per cent on the previous year when £4.7bn was collected over the same period.
Despite house prices rocketing over the past ten years the inheritance tax threshold has remained the same since 2010, meaning more estates each year are hit by the tax.
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.
Basically, if people don't downsize as they get older, 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 40pc payable above the threshold.
But this changed in April 2017 when the Government began phasing in an additional tax-free allowance which will allow HOMEOWNERS to bequeath an extra £175,000 in property wealth by 2021.
This means a new allowance for property owners of £500,000 – or £1m for couples.
Last year campaigners said families paying inheritance tax in the two years from April 2015 should be compensated because the Government has taken too long to implement the changes, which was first proposed by former chancellor George Osborne.
A substantial amount of wealth is now being taken by the government through inheritance tax.
What upsets people is that this is wealth that is being taxed twice. But the current mood means some people are worried about being vilified if they try to reduce their tax bill. Increasingly it is being seen as an 'unpatriotic' thing to do.
Do you feel unpatriotic by mitigating or removing Inheritance Tax from your estate?
There are many ways to do so that is acceptable by HMRC and will not make you feel that you are “cheating” the UK Government.
Of course, there are many of us that also feel that we have paid taxes once or twice already (income tax and stamp duty) so why do it again when we die?
BTW – Inheritance Tax is not only a charge on your UK assets – if you are still UK Domicile (you don’t have to live in UK) then your global assets are assessed when you die!
We’re here to help and answer any question you might have. We look forward to hearing from you.