House prices have boosted inheritance tax receipts (especially in London and the South East). Estates in London and the south east paid almost half of the country’s inheritance tax bill in 2013/14 because of rising house prices, which means an increasing number of people are being hit by (and potentially interested in planning for) IHT- especially in that part of the country.
The data shows that London and the south east contributed 49 per cent of IHT collected during the year to April 2014 according to HM Revenue & Customs (HMRC).
Official forecasts also suggest the proportion of estates liable for IHT will reach 8.3 per cent of all estates in 2014/15. This is the first time since 1976 that the proportion of estates subject to IHT has risen above 8%.
Properties, household savings and stocks, bonds and other financial securities make up the bulk of assets on which inheritance tax is levied. Among all estates that paid inheritance tax in 2013/14, 36 per cent of assets were held in UK housing and 30 per cent in securities.
The £4.8bn that the government is set to raise from IHT this year is, however, a tiny fraction of forecast total tax receipts of £716.5bn, according to OBR forecasts.
The amount of IHT, as a proportion of the overall yield from all taxes, is very low. IHT does, however, generate a strong emotional response from those whose families may have to pay it. People see it as a form of “double taxation” to the extent that it represents tax on assets that are or were acquired by income that suffered income tax. Whenever there is a strong emotional resistance to a tax the motivation to “do something about it” will be higher.