HMRC revenues from inheritance tax (IHT) have gone up by 9% since the threshold was frozen at £325,000 in 2009, according to analysis by Saffery Champness report Harris & Co chartered accountants Northampton as part of their accountancy services to small and medium sized local businesses.
The official statistics show that the total IHT collected rose £2.357bn to £2.585bn between 2009-10 and 2010-11, the latest years for which figures are available. The number of estates taxed also rose from 14,723 to 15,584 in the same period.
The figures indicate that the total value of residential property assets on estates notified for probate (including those in the nil rate band) increased from £31.3bn to £33bn between 2009-10 and 2010-11, a 6% increase.
Lucy Brennan, partner in the private wealth group at Saffery Champness, said: ‘These figures show that the government is succeeding in using subtle means to increase its inheritance tax revenues. Since the Chancellor recently announced an unexpected extension of the freeze until 2018, this shadow tax on inheritances is set to continue – and is also set to rise as property prices and other assets appreciate in value.’
Saffery Champness analysis also suggests that conventional IHT reliefs (the nil rate band, transferable nil rate band, reliefs for surviving spouses and reliefs on legacies left to charities) make up a greater proportion of total tax reliefs than those typically used by wealthy individuals for tax planning purposes, including Agricultural Property Relief and Business Property Relief.
Reliefs for surviving spouses make up 68% of the value of total reliefs, and charities 11%. This compares to 8% for agricultural reliefs and 3% for business reliefs.
Brennan said: ‘Encouragingly, the predominance of conventional reliefs over those reliefs used for tax planning purposes indicates that tax reliefs are benefitting those who need them the most – namely surviving spouses and family members, and also charities. However, it does leave a question as to whether people are using all of the reliefs that are available to them in their inheritance tax planning.’