Financial analysts are sounding the alarm that “more people within the South” have gotten accountable for the levy. This comes following the news that IHT receipts received by HM Revenue and Customs (HMRC) reached a record high of £6.1billion in the course of the financial 12 months 2021/22. Multiple aspects are resulting in more households within the South having to pay inheritance tax, based on experts.
These include the hike of wealth transfers following the pandemic, increased asset values and the freezing of nil rate band thresholds.
While full details for the tax 12 months are usually not yet available, experts are citing current trends which look prone to proceed which could lead on to people paying 1000’s of kilos more in tax.
For the 2019/2020, around 19,200 estates used the residential nil rate band threshold, and £4.1billion of chargeable estate value was saved from a possible IHT charge.
Overall, the quantity of IHT paid per estate rose from £179,000 in 2014/15 to £216,000 as smaller estates dropped out of paying IHT.
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Nevertheless, with the freezing of the inheritance tax nil rate bands last 12 months, more persons are prone to fall into the liability threshold for paying the tax.
It’s because while house prices proceed to rise, the edge at which someone pays IHT is remaining the identical which results in more people having to pay it.
Inheritance tax is a levy on someone’s estate after they passed away, which incorporates their money, estate and possessions.
No IHT is paid on estates that are valued on the £325,000 inheritance tax threshold if any money over this amount is left to a spouse, civil partner or charity.
Many households opt to make financial gifts as a way of saving money on inheritance tax and with the nil rate band freeze this looks set to proceed.
Helen Morrissey, a senior pensions and retirement analyst at Hargreaves Lansdown, shared why IHT receipts are on the rise.
Ms Morrisey explained: “Inheritance tax receipts have boomed hitting an all-time high in 2021/22.
“That is due largely to the horrible consequences of the pandemic which saw increased numbers of wealth transfers.
“Nevertheless, there are other aspects at play that mean more persons are being caught out by what’s traditionally seen as a mogul’s tax.”
The financial expert noted why the choice to freeze inheritance tax thresholds is resulting in households being forced to pay greater than they otherwise would have, “particularly within the South”.
She added: “One major factor is the choice to freeze the varied thresholds available until 2025/26.
“Because of this estates price greater than £325,000 are subject to inheritance tax, though any unused allowances when one partner dies could be transferred to spouses and civil partners.
“As well as, if you wish to transfer a property to a detailed relative you’ve gotten an extra nil rate band of £175,000.
“These allowances have been well used to assist families avoid having to pay billions of kilos in IHT.
“These may feel like large amounts but given the stellar performance of the property market lately the choice to freeze these allowances means an increasing number of people, particularly within the South, have gotten liable to pay and with limits being frozen until 2026 we are going to likely see the quantity of tax paid proceed to grow over the approaching years.”