British families paid a record £5bn in inheritance tax last year
Inheritance tax paid by British families topped £5bn for the first time in history, in the year to April 2017 new data reveals.
A record number of middle-class families are finding themselves caught up in the world of Inheritance Tax (IHT) because of rising property. Elderly people are also less likely to downsize now with current stamp Duty levels.
Some families have missed out on the new, higher limits which let them inherit homes worth £1m tax-free.
In the year to April 2017, £5.1bn was collected by HMRC through IHT, which represents a rise of 9 per cent on the same period of the previous year.
The inheritance tax threshold has remained static since 2010, despite house prices soaring over the past decade meaning more estates are caught by the tax.
Source: The Telegraph 21st June 2017 http://www.telegraph.co.uk/news/2017/06/21/british-families-paid-record-5bn-inheritance-tax-last-year/
Understanding Inheritance tax…
In basic terms, Inheritance tax is charged at 40pc on any estate worth £325,000 or more, although a surviving spouse can inherit their partner’s allowance.
The introduction of the main residence nil-rate band, introduced in April, is worth £100,000 per person when passing on a main residence in addition to the normal £325,000 per person allowance. This results in an individual being able to pass on £425,000 without IHT, as long as it includes the family home and passes directly to a child or grandchild (and is not subject to a discretionary trust).
This new allowance increases by £25,000 a year until it reaches £175,000 in April 2020. That will give each individual an allowance of £500,000 or £1m for a couple. On first death, any unused allowance will pass to the surviving spouse. Estates valued at £2m or more will see the additional band tapered by £1 for every £2 over the threshold.
The existing nil rate band has not increased since 2010, and current legislation will extend the current freeze of the existing nil-rate band at £325,000 until the end of 2020 to 2021.