UK Inheritance Tax Paid Up To £5.4 Billion Last Year
Published / Last Updated on 11/08/2021
On 29th July, HMRC released its latest inheritance tax (IHT) liabilities and payments statistics. We have now had chance to digest it with the latest figures being mainly for tax year 2018/19 with limited information only for 2019/20/21 with more due in July 2022 and 2020/21 a year later. It is interesting that data such as this is not released until ‘the horse has bolted’ and we expect significant rises over the coming years given that all allowances are frozen until 2026/27.
In this latest round of figures, it HMRC reports that:
3.7% of deaths created an IHT liability although despite falls in IHT a few years ago due to the new residence nil rate band for residential property being introduced where many people no longer ay IHT up to £1m for couples on 2nd death, IHT bills are now firmly climbing.
IHT receipts received by HMRC during the tax year 2020/21 were £5.4 billion, an increase of 4% (£190 million) on the tax year 2019/20. This tells us that the value of assets are continuing to rise and given allowances are frozen for the next few years tax receipts will rise exponentially.
This is not just because allowances are frozen, it is also because people are not planning like they used to as they perceive the combined £1m threshold for couples with couple as enough when it clearly is for many. The reality is we have been, we are and we will pay more.
As you would expect given higher property prices, London and the South East faced the higher IHT bills with the lowest being in the North West, Wales and Northern Ireland. Average IHT bills for estates that had to pay tax:
- Londoners paid on average £271,800
- North West £152,900
- Wales £156,000
- Northern Ireland £158,700 in Northern Ireland
Link to HMRC Report: https://www.gov.uk/government/statistics/inheritance-tax-statistics-commentary/inheritance-tax-statistics-commentary
Comment
Inheritance tax is the only tax that we can legally mitigate for i.e. make plans and take action to reduce the bill. In most cases, with careful IHT planning, the IHT bill could be £zero.
Read: 13 Ways to Reduce Inheritance Tax
Watch: 75 Videos on Inheritance Tax Planning