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Inheritance Tax payments scale new heights

The latest statistics from HMRC show that Inheritance Tax receipts hit a new high of £5.2bn in 2017-18, an increase of 8% over the previous financial year.

Since the nil-rate band was frozen at £325,000 in 2009, IHT receipts have grown by an average of 10% a year, helped by the rising value of residential properties in the UK, which has comfortably exceeded the rate of inflation.

However, the latest statistics do not take into account the full impact of the residence nil-rate band (RNRB) introduced in April 2016, which allows estates an extra £125,000 in the 2018-19 tax year and applies where the deceased owned a home, or share of one, that was included in their estate and left to direct descendants. In effect, the RNRB enables someone to pass on a family home worth £450,000 without incurring IHT in 2018-19 and will rise by a further £25,000 a year for the next two years.

Commenting on the latest trends, Royal London’s Director of Policy, Steve Webb, said: “The amount of money raised from Inheritance Tax has doubled in less than a decade and a steadily rising proportion of estates are now caught in the IHT net. Even the introduction of an additional nil-rate band for families passing on their home to their children was not able to stem the growth in IHT revenues, yet it remains riddled with anomalies. Inheritance Tax is a complex tax and the sooner it is overhauled the better.”

Sean McCann, Chartered Financial Planner at NFU Mutual, added: “We’ve seen in recent years a more aggressive approach from the taxman that has driven a surge in IHT revenues. Simplification can’t come soon enough for many families and taking financial advice should be a priority for anyone with a potential IHT problem.”

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