As property prices rise, the number of estates paying inheritance tax (IHT) is set to double over the next five years.
The Office for Budget Responsibility (OBR) – an independent watchdog – predicts that Inheritance Tax receipts will rise every year until at least 2027.
The chancellor introduced the Stamp Duty Holiday last year to kick start the property market, this along with pent-up demand has pushed house prices to an all-time high. Higher house prices and increased deaths from Covid has meant that many who would previously be outside of the IHT limit are being dragged in by the value of their property.
According to The Office for Budget Responsibility’s forecasts, tax receipts accumulated from IHT will rise from £5.1billion in 2019-20 to £6 billion in 2021-22.
In 2019-20 a total of 22,800 estate had to pay IHT but the OBR believes this will rise to 41,400 by 2026-27.
While property prices have increased the inheritance tax allowance of £325,000 has been frozen since 2009. Above the level of £325,000, IHT is paid at 40 per cent.
The £175,000 family home allowance – for those bequeathing properties to a direct descendant – will stay the same until at least 2026.
While the chancellor may have lost out on Stamp Duty Land Tax, he has more than made up for it with the increased revenue from those dragged over the inheritance tax threshold.
Based on these figures, it is clear that the government expects to generate billions more from inheritance by the simple act of doing nothing.
For those caught in the death tax trap, getting early advice on wealth management, and making a will can help.
To make the best of tax allowances and to use your will for future financial management, call 01704 532890.