New figures show the amount of money being paid in Inheritance Tax has risen to levels not seen since the financial crisis.
Figures from the Office for National Statistics (ONS), show the amount of Inheritance Tax (IHT) collected rose to £3.1 billion in the 2012/13 tax year, up from £2.9 billion in the previous year. Whilst receipts from IHT still dwarf those from Income Tax and National Insurance, they have now risen for the last three years and are up by nearly £1 billion since 2009/10.
There are a number of reasons why the Treasury is enjoying higher receipts from IHT:
- The tax-free IHT threshold has remained unchanged at £325,000 since April 2009, inflation and an increase in asset prices has therefore effectively eroded its value
- The value of shares has risen since the stock market slump following the financial crisis
- House prices have started to rise again
The IHT threshold is the maximum amount of money which an individual can leave on their death, before tax is paid. It has been stuck at £325,000 since 2009 and the Government has indicated it will remain at this level until at least 2019.
For married couples, the unused proportion of the threshold can be passed on to surviving spouse, which can effectively double the level of assets passed, before tax is due, to £650,000.
Any assets above the value of the threshold are subject to tax at a rate of 40%.
In a statement the ONS said: “Up until 2007/08 receipts had been climbing steadily, reflecting increases in asset prices over this period, specifically property prices and household savings.”
A voluntary tax?
Due to the many ways in which it could be avoided, Inheritance Tax used to be seen as almost ‘voluntary’ by many people.
However, many of the loopholes have now been closed over recent years. Despite this, there are many options, including annual exemptions, gifts, as well as certain types of investment, which can help mitigate the amount of tax due on your death.