HM Revenue and Customs (HMRC) has taken a record £4.6 billion in inheritance tax (IHT) in 2015/16.
According to law firm Wilsons, this represents a 21% increase from the £3.8 billion the tax office took in the previous year.
Overall this year’s takings represent a 70% increase from the £2.7 billion HMRC netted in £2.7 billion.
Despite the IHT threshold remaining at £325,000 since April 2009, increases in property prices means more individuals are being caught by the tax, according to Wilsons partner Tim Fullerlove, a specialist in trusts and tax.
‘As the threshold has stayed at a fixed rate for almost seven years, individuals who were not originally intended to be taxed are now facing significant bills because of the rise in property prices, particularly in London and the South East of England,’ he explained.
Despite the record IHT haul, the government’s recently announced plans to introduce new probate fees that means an estate worth more than £2 million would pay a probate of £20,000 instead of the current £215.
However the government has also added a new main residence nil-rate band for the primary residence when it is bequeathed to a direct descendent. This will add an extra £100,000 to the threshold in 2017 and by 2020 will add £175,000.
This band will gradually bring the threshold to £1 million for married people, with certain conditions. However, these measures will do less for childless couples and individuals who have never owned their own property.
‘Despite HMRC taking a record figure from inheritance tax over the last year, the government wants to further boost its revenue and is now planning to raise probate fees,’ said Fullerlove.
‘The planned new fees do not reflect any real difference in the costs to the probate service of handling probate on a large or small estate. In effect, they amount to an additional inheritance tax on larger estates.’
by Jonathan Harker of New Model Advisor Magazine 4th April 2016