Revenue increases recovery of inheritance tax to £3.4bn
By Lucy Brennan
Freeze on IHT threshold continues to fuel the rise in total revenue for HMRC
HMRC has released its latest yearly statistics on inheritance tax (IHT), which shows a significant increase in the Revenue's income to more than £3.4bn.
This represents an increase of 8.6 per cent and brings the total amount of tax paid close to pre-recession levels.
The freeze in the inheritance tax threshold at £325,000 has continued to fuel the rise in total IHT revenue for HMRC. According to the data, this pace of growth appears to be increasing, with this year's rise ahead of the 7.9 per cent increases seen over the previous two years.
The number of estates taxed rose from 15,584 to 15,976 over the same period, a rise of 2.5 per cent and representing nearly 3 per cent of all deaths in that year.
Furthermore, a recent analysis by the Office for Budget Responsibility has predicted that the number of estates likely to be liable for inheritance tax in the next five years is set to double.
The latest HMRC figures also show that the proportion of IHT being borne by estates worth less than £1m continues to fall and now represents only 31 per cent of total IHT. This contrasts with 51 per cent during 2006/07.
In addition, the figures show that the total value of residential property assets on estates notified for probate (including those in the nil rate band) increased from £33bn to £33.8bn between 2010/11 and 2011/12.
Finally, the utilisation of reliefs for surviving spouses fell from 68 per cent to 62.68 per cent, while those for charities rose 1 per cent to more than 12 per cent of the value of total reliefs.
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Lucy Brennan is a partner at Saffery Champness "Inheritance tax continues to be a cash cow for the Revenue, as both overall tax income and numbers of liable estates continue to rise. "The growth of overall IHT income also appears to be gaining steam, although it is notable that the rise in the number of estates having to pay IHT is growing at a far slower rate. HMRC itself has noted that the recovery, fuelling property prices and investment portfolios, combined with the nil rate band being frozen, has resulted in the increased income. "Despite commitments to maintain the IHT threshold freeze through 2018, the Conservatives appear to once again be breathing life into the idea of raising the threshold to £1m. If that materialises, serious questions will no doubt emerge about the potential long-term impact on IHT-related income to HMRC. "This will likely come as a welcome relief to taxpayers around the country, who continue to fall within the IHT's grasp in increasing numbers and at increasing levels." |
'A welcome relief'