Tax Man Grabs A Record £5.4 Billion From Families Paying IHT

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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 IHTTax paid (millions)Average payment
East Midlands1160£190£163,793
East of England3310£527£159,215
London5390£1,220£226,345
North East427£56£131,148
North West1770£246£138,983
Northern Ireland276£47£170,290
Scotland1300£219£168,462
South East6430£1,200£188,625
South West3040£498£163,816
Undisclosed1550£301£194,194
Wales734£93£126,703
West Midlands1510£246£162,914
Yorkshire & The Humber1220£207£169,672
Total28117£5,050£166,474

Source: NFU Mutual

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