Yahoo Finance Inheritance tax haul hits record high as house prices climb
Families paid the taxman £4.84bn in inheritance tax last year, a record high as house prices and the stock market climbed.
Tax payments increased by 4pc on the year as household wealth increased, HM Revenue and Customs said, but the level at which inheritance tax kicks in held steady at £325,000.
The government had only expected to bring in £4.7bn, so the rising number represents an extra windfall for the Treasury.
The pace of the increase, which does not account for inflation, has slowed - in the previous year an unusually high number of winter deaths helped drive up inheritance tax payments by 22pc - but remains on the upward trajectory the levy has followed since 2009-10.
Property wealth makes up the biggest chunk of estates for all families except the very poorest, who typically have more in cash and are less likely to own their own homes, and the very richest, whose investments in shares and bonds tends to outweigh their property.
In total 23,300 estates paid inheritance tax in 2014-15, the latest year for which data are available.
That amounts to 3.9pc of all deaths in the year, up from 3.4pc in the previous year as rising asset prices pushed more estates over the £325,000 threshold.
Before 2009 the threshold was set each year and so could rise to reflect inflation and rises in overall asset prices. That system is set to start again from 2020, leaving estates facing a rising tax burden until that point.
“There is a long time between now and 2020 for things to be changed. It is unreasonable for people to be taxed on indexed gains, it is just unfair,” said Danny Cox, head of financial planning at Hargreaves Lansdown.
A new system comes into place this year that cuts the amount of tax paid on family homes when they are given to direct descendants, and is expected to ease the burden for some households.
Initially that additional zero-rate band will amount to £100,000, rising to £175,000 by 2020-21.
That takes the total tax-free allowance up to £500,000, and as this can be transferred between spouses when the second partner dies, the threshold covers up to £1m of residential property.
Despite these changes the overall tax bill is expected to keep on rising.
Next year the tax haul is expected to rise to £5bn, according to forecasts from the Office for Budget Responsibility, steadily increasing each year to hit £6.2bn in 2021-22.
