Hart Shaw is welcoming news that the economy is growing in strength. As a result, inheritance tax (IHT) receipts are up by 8.6% this year to more than £3.4bn, meaning that it is moving close to levels last seen before the financial crisis.
Data published by the Office for National Statistics (ONS) shows the 2013–2014 total as being £3.402bn, compared with £3.104.bn the previous year. In 2007–2008, IHT receipts hit a record £3.823bn, falling to £2.839bn the following year. IHT receipts fell further in 2009–2010 to 2383.6, when tax changes allowed spouses to pass their allowance to their surviving partner on death, but have been on an upwards trend ever since.
In its commentary the ONS said sharp rises in property prices and a freeze on the threshold for IHT were key drivers of the increase.
Residential property makes up a great deal of the total value of taxpaying estates and the rise in property prices has contributed to a rise in overall tax take. This rise in property values is a major contributor to pushing up the average value of estates and as a result an increasing number of estates will now be valued over the IHT threshold. But in addition to IHT these property increases are driving up Stamp Duty Land Tax receipts as Stamp duty starts at 1% on sales between £125,000 and £250,000, rising to 3% on sales of up to £500,000 and 4% on homes costing up to £1million.
The proportion of IHT being shouldered by estates worth less than £1m continues to fall overall, now representing 31% of total IHT, compared with 51% in 2006–2007.
For more information on Inheritance tax please contact Steve Vickers, Tax Partner on T: 0114 251 8850 or email: steve.vickers@hartshaw.co.uk.