Families have paid a record £5.6 billion inheritance tax despite the government increasing tax breaks.
In the 2018-19 tax year, the IHT tax take increased by £164 million (3.1%), according to official data published by HM Revenue & Customs.
The spike in receipts comes at the same time as the government has introduced the residential nil-rate band (RNRB) that allows owners to pass their homes to close relatives free of tax.
The RNRB is phasing in from April 2017, and during this time, the tax take has increased by £500 million.
Sean McCann, a chartered financial planner at NFU Mutual, said: “Inheritance tax is deeply unpopular and fiendishly complicated. Recent changes have just added to the problem and in many instances the complexity of the rules means that families are missing out.
Paperwork rushed through
“It comes as no surprise that Inheritance Tax receipts are so high. Receipts have been maintaining a record pace for a couple of years.
“The recent threat of increased probate fees created a surge in tax receipts as some executors rushed through paperwork.
“March receipts surged by £165 million to £537 million. We haven’t seen a rise like that since 2017 – just before the last time probate fees were set to increase. Once again, the new fee structure has been delayed but we could see further big rises in these figures once the government announces a new implementation date.”
The RNRB lets the executor for someone who dies after April 6, 2017 with an estate valued at more than the basic IHT threshold to claim additional tax relief.
The additional tax relief is phasing in over several years, sitting at £150,000 for 2019-20, rising to £175,000 next April.
IHT up every year for a decade
The additional tax relief will allow children to inherit a family home valued at up to £350,000 without incurring IHT.
From April 2020, a couple can leave cash and their home worth up to £1 million free of IHT.
However, if the estate is valued at more than £1 million, the family will pay IHT on the amount above the threshold at a rate of 40%.
HMRC data shows IHT receipts have increased every year since 1980, except for a two-year blip when the amount dropped in 2008 and 2009.
