It's not the farms, but the quiet leafy suburbs where inheritance tax hits hardest

Kingsley Napley, a leading law firm, has conducted an extensive analysis of recent HMRC inheritance tax data, unveiling the local authorities most impacted by this compulsory levy. Their findings illustrate a stark geographical divide in terms of both the number and total value of estates affected by inheritance tax bills.

According to the data, Richmond Park experienced the highest number of estates affected, totalling 184, closely followed by Finchley & Golders Green with 183 and Esher & Walton at 156. However, when measuring the total amount of inheritance tax paid, Kensington topped the list once again, contributing a staggering £154 million to the government. This was trailed by Chelsea & Fulham and Finchley & Golders Green, demonstrating a notable trend among affluent areas.

The research highlights that areas like Ruislip, Northwood & Pinner have also emerged as significant contributors to the taxation landscape during 2022-23, both in terms of estate volume and monetary value. James Ward, Head of the Private Client Practice at Kingsley Napley, elaborated on the implications of these figures, stating “As usual, London and South-East constituencies top our leaderboard but the bigger picture is that over 15% more estates across the country were dragged into the IHT whirlpool for the year in question due to continued house price growth and the fact tax bands have been stuck since 2009.”

Ward cautions that the slowing growth of house prices may change this trend, especially with potential changes to pensions becoming subject to inheritance tax from 2027. He noted, “The expectation is that this will add approximately 10,000 more estates to HMRC’s sights and increase estate values by an average of £34k when pension assets are included.”

In response to the evolving landscape of inheritance tax, Kingsley Napley is advising clients engage in active estate planning, taking advantage of available exemptions such as the IHT nil rate band and annual exemptions. Ward emphasised the importance of proactive measures by stating, “IHT remains one of the most unpopular taxes that people resent their families or beneficiaries paying, so it makes sense to take advantage of these before Rachel Reeves chokes off mitigation measures given the pressure she is under to find funds for the public purse.”

Tax receipts by value 2022/23

The analysis of tax receipts showcases the changing dynamics of inheritance tax, heavily influenced by economic factors and government policies, setting the stage for future tax planning strategies and potential reforms.