Inheritance tax paid by families more than doubles in a decade – raising fresh questions about the levy, which has been branded a stealth tax
Inheritance tax paid by families has more than doubled in a decade – raising fresh questions about the levy, which has been branded a stealth tax.
Britons are given a tax-free allowance, known as the ‘nil-rate band’, above which they are required to pay 40 per cent tax on the deceased person’s estate.
This allowance has been frozen at £325,000 since 2009 despite rising inflation and a surge in house prices. The threshold will continue to be frozen until at least April 2026 as part of Chancellor Rishi Sunak’s efforts to plug the Covid-induced hole in Britain’s finances.
Questions: Britons are given a tax-free allowance, known as the ‘nil-rate band’, above which they are required to pay 40 per cent tax on the deceased person’s estate
Experts say soaring house prices mean the threshold is now far too low, arguing it should have risen in line with property inflation.
Total receipts from inheritance tax have increased from £2.7billion in 2010 to £5.4billion, according to a review of Treasury documents by The Mail on Sunday.
The Treasury is forecast to rake in £7.6billion a year by 2027.
Data from Nationwide Building Society shows that the average London home has been worth more than £325,000 since 2013, although nationally the average house price remains below the threshold, at £253,112. Sunak faces pressure to raise the threshold ahead of the forthcoming Budget on March 23.
Shaun Moore, a tax expert at wealth manager Quilter, said: ‘inheritance tax was once considered a tax on the very wealthiest in society, but this is far from the case now.
‘Rampant house price growth and asset price inflation over the past decade, combined with a frozen nil rate band, has resulted in more and more estates paying inheritance tax and the Government bringing in more and more cash from families. The Government is undertaking a programme of tax by stealth.’
As well as the nil rate band, there is an additional allowance worth £175,000 for passing a family home to direct descendants.
Married couples and civil partners can combine their allowances, meaning £1million can be passed on tax-free.