Number of Estates Liable To Inheritance Tax Increasing

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December 4th 2021
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Number of Estates Liable To Inheritance Tax Increasing

Since 2009 inheritance taxable estates have been increasing with London and South East England topping the charts.

In a recent release of data by HMRC relating to inheritance tax statistics for the 2015/2016 fiscal year it was shown that since 2009 the capital value of estates has been increasing, with only 54 percent of this due to residential property price rises.

The estate is classified as all assets material such as property and possessions as well as liquid cash, stocks, insurance payouts etc.

IHT (Inheritance tax) is payable at 40 percent on an estate calculated on the value of the assets described above, gifts made within 7 years of death or to relevant trusts. Gifts can be made up to £250 per recipient per year and remain exempt, or up to £3,000 per year.

The current threshold (Nil Rate Band 2018/2019) before paying inheritance tax is £325,000 if you are not leaving the estate to a spouse/civil partner, charity or similar. Additionally bequeathing to your children or dependents increases the threshold to £450,000 due to the TMRA (Transferable Main Residence Allowance). This is currently set at £125,000 but will increase by £25,000 next year and the year after.

Each person essentially has a £450,000 inheritance tax allowance but one partner can leave their allowance to the living partner (transferable nil rate band) so a couple could have an inheritance tax allowance as high as £900,000.

The £325,000 nil rate band has been frozen since 2009 and this change brought more people into paying inheritance tax, year-on-year. Prior to the change, numbers of IHT liable estates were falling due to the introduction of a transferable nil rate band in 2007. 2008/2009 saw the economic crash with significant effects on property but the net value of estates remained unchanged during this period.

In 2015/2016 nearly 25,000 estates were liable to paying inheritance tax - 1,300 up on the previous year. This is 4.2 percent of all UK deaths. Between 2009 and 2015 estate values rose by £62 billion - 54 percent attributable to growth in property prices.

Last year the Chancellor cashed £5.2 billion in IHT receipts - an 8 percent increase on the year before. Between 2014 and 2015 there was a 22 percent rise in tax receipts which is partly due to near 44,000 extra deaths during the winter of 2014.

40 percent of estates are valued at over £2 million. 56 percent were valued at less than £500,000. The most common value of an estate was around £100,000, with 70,000 estates valued around the amount in 2015/2016.

As expected, people under 45 make up the lowest estate value age group with those 85 and over, the highest. Residential estate value increases significantly after age 45. From those liable to IHT, male-owned estates have higher values compared to females, a difference of over £150,000. Females however were more likely to live longer (3.7 years), thus have a higher IHT nil rate band (due to transferred nil rate bands).

London and the South East lead the table of both number of liable estates and tax due, with Northern Ireland on the other end of that scale. Average taxpayer in London pays £223,000 in IHT compared to £127,000 in Northern Ireland.

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