The UK government hauled in £5.2bn ($7.2bn, €5.9bn) of inheritance tax receipts during the 2017/18 tax year, a figure 8% higher than the previous year.
The 8% rise, representing £400m, for the latest tax year comes despite the government introducing the residence nil-rate band (RNRB) allowance in April 2017.
The RNRB, combined with the traditional nil rate band, allows married couples to pass on a family home worth up to £850,000 tax-free.
Under the government’s current plans, the RNRB will be increased each year until 2020, when a married couple will be able to bequest a home worth £1m tax free.
The latest rise extends the steadily rising trend for return for the government from this tax, with HM Revenue and Customs data showing that inheritance tax receipts have increased by 100% in just seven years.
In a Financial Times article, HMRC said it expected inheritance tax receipts to fall as the RNRB allowance increases.
“The allowance was only available from April 2017, much of the tax received dates from before the new relief took effect,” HMRC told the Financial Times.
Order to chaos
Despite HMRC expecting inheritance tax receipts to drop, many experts say people are not taking advantage of the allowances as they are extremely complex.
In January the UK Treasury acknowledge that inheritance tax is “particularly complex” and requested that the Office of Tax Simplification (OTS) carry out a review.
George Bull, senior tax partner at RSM UK, said the review provides a “crucial” opportunity to simplify inheritance tax.
“Without a doubt, there is a continuing need for these reliefs but somewhere along the way they have lost their original focus. Now is the time to review that,” Bull said.
I would also have to agree, so many of the people I meet do not think of doing a review or find it difficult to discuss, however this is so important not just for succession planning but to secure your lifetime’s work, savings, investments without paying HMRC even more.
I would be happy to meet for coffee, either in person or conference call and we can discuss things further.
All the best
+60 3 2026 0286
Courtesy of International Adviser