British families paid a record-breaking £5 billion of Inheritance Tax (IHT) in the last financial year, new figures have revealed.
Experts say the figures, which highlight the 12 months before more generous IHT rules were introduced, are a result of soaring house prices.
A record number of families narrowly missed out on a new allowance which lets individuals pass down an extra £100,000 tax-free when transferring ownership of property to children.
Before this allowance was introduced, an individual could pass down a maximum of £325,000 before having to pay tax at a rate of 40 per cent. Married couples and civil partners can transfer their allowance to a surviving partner, however.
The figures say £5.1 billion was collected by HM Revenue & Customs – a rise of nine per cent on the £4.7 billion collected the year previous.
The Office for Budget Responsibility (OBR) said the number of families which pay Inheritance Tax has more than quadrupled since 2010, with that number rising from around 10,000 to over 40,000 in 2016.
David Hollingworth, a property expert at mortgage firm London & Country, also suggested that fewer people are willing to downsize, meaning individuals are passing down their entire estate in a single transaction.
“If elderly people don’t downsize they may pay more inheritance tax as more of their money will be tied up in their property, leaving them with less to give away.
“There are various reasons why people are not downsizing, a big one is the huge cost of moving, including stamp duty and also the lack of suitable housing for retired people.”
If you choose to benefit from our professional help, you can ensure that your family pays the lowest amount of inheritance tax possible. Furthermore, the earlier you make arrangements the greater your chance of getting the most from available tax opportunities.
For more information on how we can help you with inheritance tax and estate planning, please contact us.