The number of families paying death duties has reached a new high – although who pays most depends on their postcode, according to official statistics.
The latest data from HM Revenue & Customs reveals 28,100 estates had to pay inheritance tax in 2016-17 – up 15% on a year earlier from 24,500 estates.
HMRC also collected £5.38 billion in IHT, another new record reflecting a 57% increase in five years.
Average IHT bills were £180,000, although this varied considerably between London, the South East and other regions, mainly depending on the value of homes.
Estates in the capital paid the highest average IHT bill – with 5,390 handing over an average £226,345. This dropped to 734 estates paying an average £126,703 in Wales.
Fearful and confused
Assessing the data, Sean McCann, Chartered Financial Planner at NFU Mutual, said: “Inheritance tax is a growing source of revenue for the government.
“The complexity of the rules leaves many fearful and confused about how best to pass their wealth onto their families. A simplification of IHT is long overdue.
“Many of the exemptions and rules on gifting haven’t changed in more than 30 years and are poorly understood, we need a simpler system to help families plan their finances.
“The rise in IHT receipts is not a surprise, HMRC is more willing to challenge valuations and investigate claims for reliefs and many families are paying the price.”
Inheritance tax is paid at a rate of 40% on estates of more than £325,000, although other reliefs and allowances can apply to reduce the amount of tax paid by increasing the tax threshold to a nil-rate band of £475,000. This will rise to £500,000 from April 2020.
IHT paid by region 2016-17
|Region||Estates paying IHT||Tax paid (millions)||Average payment|
|East of England||3310||£527||£159,215|
|Yorkshire & The Humber||1220||£207||£169,672|
Source: NFU Mutual