According to data published by the Office of National Statistics (ONS) this month, British families paid £3.1 billion in Inheritance Tax (IHT) to the government in the tax year to April 2013 – that’s up from £2.9 billion a year earlier.
This is the third consecutive year we’ve seen a rise in IHT volumes, after sharp falls were recorded between 2007 and 2009 due to policy changes and the economic situation at the time. Compared with 2009-2010, the amount of IHT collected by the state was 29% higher in this last tax year.
ONS put the 8% year-on-year increase in IHT down to the strong recovery of the housing market combined with increased savings and investment returns. As a consequence, more estates were valued above the £325,000 IHT threshold. The government has indicated it will not change the threshold until at least April 2015, which implies that even more people will likely need to pay IHT, as property prices increase.
Property prices now differ based on the area they are located in, but as a whole they are on the rise because of the surging value of properties in London and the South East.
ONS also published IHT data for 2010-11 broken down by region, which revealed that the highest number of properties liable to the tax were located in the South East and London. Northern Ireland and the North East had the smallest number of estates that had to pay IHT.
The report also showed that just 15,584 estates paid out the tax, which is equal to only 3% of deaths during the year. Interestingly, this suggests that the number of estates liable to pay IHT is actually quite low.