A Inheritance tax should be reformed to reflect inflation, a lawyer has argued as receipts rose to a record £5.4 billion. HM Revenue and Customs figures showed that revenue in 2018-19 rose by 3% from £5.2 billion the previous year.
Of the £5.4 billion collected, 72% was from estates worth more than £1 million. In 2016-17, 4.6% of deaths resulted in a charge. The figure was 5.9% before the financial crisis but fell to 2.7% in 2009-10. It has climbed steadily since then, due to long-term rises in property prices and the nil-rate band remaining at £325,000 for the past decade. In the past nine years the amount HMRC has raised through IHT has more than doubled. The proportion of estates which pay the tax has also been increasing, although it still remains relatively low at 4.6%.
Experts believe that the introduction in 2017-18 of a top-up allowance on the normal IHT threshold had yet to have any strong impact. The residence nil rate band (RNRB) gives an additional allowance to people leaving their family home to direct descendants like children or grandchildren. It will be worth an additional £175,000 by 2020-21. The figures show the RNRB hasn't reduced the amount paid overall in 2018-19, because so much of the tax is collected from larger estates, for whom this is a small portion of their estate €” and who begin to lose this relief as soon as their estate is over £2 million.
In July, the Office of Tax Simplification proposed several changes to inheritance tax. The body did not make any recommendations on the RNRB, saying it was too soon to do so.
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About the Author: Glen Callow
