The tax man has collected more than £3 billion in inheritance tax due to rising property values and an increase in share prices.
HM Revenue and Customs is also targeting more resources on collecting inheritance tax (IHT), according to accountants.
The tax take represents the highest amount of IHT collected by HMRC since 2007.
The fear for many families is the IHT they pay will increases as thresholds are pegged until 2019, while property prices and shares are starting to recover, pushing up the value of homes and investment portfolios.
Fresh data from the Office of National Statistics shows IHT collected by the tax man was up £200 million in the tax year ending April 5, 2013, at £3.1 billion, compared with £2.9 billion collected in the year ending 12 months earlier.
Housing boom
The trend for the past three years has been for the amount of IHT paid to increase.
Last year’s IHT was 29% higher than the year to April 5, 2010, when HMRC reported a £2.4 billion total.
IHT peaked in 2008, at the height of the housing boom, at £3.8 billion, confirming the link between property prices and the amount of IHT paid by families, said the ONS.
“IHT tax collected rose steadily in the years up to 2008, reflecting the increasing value of assets, mainly homes, during this period,” said the report.
“The amount of IHT then dropped as house prices decreased in value at a rapid rate. A policy change by the Labour government to pass assets between married couples without charging IHT also affected the tax take.”
Emotive tax
The policy change was called the ‘transferable nil rate band’ and allowed any unused IHT threshold from a spouse who had died could go to the surviving spouse to be claimed when they died.
The nil-rate band is £325,000 per person. The transfer of unused allowances effectively doubles the allowance to £650,000 for couples.
Any net assets left in an estate valued at above the nil rate band are taxed at 40%.
Julia Rosenbloom, a tax adviser, said: “IHT can be emotive for some families as a small number of wealthy people tend to pay a high amount of tax. To put this in perspective, all the £3.1 billion IHT collected last year is just 0.6% of 1% of all the tax collected by HMRC.”
