Inheritance Tax Take Hits 35 Year Peak
The Office for Budget Responsibility has released new figures that suggest the number of UK families paying inheritance tax is at a 35-year high.
Rising house prices have pushed the value of family assets above the nil rate band threshold, resulting in an estimated 40,100 families facing inheritance tax in the current tax year; almost three times as many as 6 years ago.
According to the official figures, the number of people affected by inheritance tax is likely to rise to 45,100 in the 2016/17 tax year and then fall back when the additional allowance for family homes starts to take effect in April 2017. The Office for Budget Responsibility has estimated that when the allowance is introduced, the number of deaths subject to inheritance tax will fall by a third to 30,300, equivalent to 5.4% of the total annual estates processed.
This is the largest number of families paying inheritance tax in any year since 1979/80, Margaret Thatcher’s first year as prime minister, when a tax of up to 75% was levied on inherited assets above £25,000.
Whereas 2.6% of all deaths incurred inheritance tax liabilities in 2009/10, the proportion has risen sharply to an estimated 7.1% in 2015/16. The Office for Budget Responsibility projects it will affect 8% of estates in 2016-17.
Despite reducing the numbers affected by inheritance tax in the longer term, the introduction of the new allowance will not cut the overall amount of tax raised on estates and The Office for Budget Responsibility has predicted that the Exchequer will still receive receipts of around £5.6 billion by 2020/21.