The amount of Inheritance Tax (IHT) paid during the 2011-2012 year reached £2.91 billion affecting 20,000 UK residents, an increase from £2.72 billion recorded in 2010-2011.
The Chancellor, George Osbourne, recently announced that the threshold was to remain at £325,000 until 2015-2016, at which time it will rise by £4000. However, critics say that this rise is unlikely to eclipse inflation and could mean a further increase in the number of individuals impacted by inheritance tax.
Generally speaking inheritance tax of as much as 40% is due on assets left behind that total over the inheritance tax threshold of £325,000.
Patrick Stevens, tax partner at Ernst & Young, said:
“The increase is two and a half years away, which means that lots more people will be dragged into the inheritance tax net by it.
Even the families of those owning very modest houses in south east England will be caught.”
Furthermore, even with the expected rise taking the IHT nil rate band to £329,000, many are arguing that this is still far from the £1 million the chancellor had promised in opposition during the 2007 Conservative party conference.
The measures placed means that the government is expected to receive around £80 million over the course of three years, a treasury paper revealed.
Matt Taylor of Rockpool Investments said:
“Inheritance tax at 40pc is one of the highest tax liabilities facing British individuals. For high net worth individuals, IHT can almost halve the value of an estate after death because so much of the individual’s wealth will be subject to the 40pc rate. People need to be proactive in managing their financial affairs if they want to pass on their wealth intact.”
Despite the projected earnings the government is likely to receive, HMRC state that taking a small sample is not indicative of set trends. Citing fluctuations in patterns, with one year seeing a rise in high value estates being passed on. For example in 2006-2007, 34,000 taxpayers were subject to inheritance tax, 14,000 more than 2011-2012.