Inheritance tax receipts up by a fifth

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Inheritance tax (IHT) receipts totalled £4.7 billion in 2015/16, a 22% increase on the previous year.

Without taking inflation into account, this is the highest receipts have been since the IHT system was introduced in 1986.

The Office for National Statistics cites several reasons for the rise:

Property prices

Property makes up around 30% of the value of taxpaying estates. Increases in property prices over recent years are reflected in increased IHT revenue.

No change in the nil-rate band

A greater number of estates were valued above the IHT threshold of £325,000, which has been frozen since 2009.

Number of deaths

There were 17% more deaths in the last 3 months of 2014/15 compared to the same period the previous year.

Family home allowance

Although the IHT threshold will remain at £325,000 until at least 2020/21, an additional nil-rate band for property will be introduced in April 2017.

The ‘family home allowance’ of £100,000 per person will allow individuals to pass on assets including a family home worth up to £425,000 to direct descendants. It will increase by £25,000 each tax year until it reaches £175,000 in 2020/21.

Married couples and civil partners will be able to combine their allowances.

The allowance will be tapered by £1 for every £2 on estates with a net value of more than £2 million.

People who downsize or sell their home on or after 8 July 2015 will also be eligible for the family home allowance.

Contact Sue Stephens or John Elliott to discuss minimising IHT.