Although Inheritance Tax accounts for a relatively small amount of the total UK tax receipt, it has still grown significantly over the past 10 years. In fact, HM Revenue & Customs has increased by almost £340 million the money it gets from inheritance tax in the last 10 years. In the 2001/2002 tax year £2.38bn was collected, whereas in 2011/12 £2.72bn, so why are we paying so much more?
When the tax was first introduced, over 100 years ago, it only really affected the very wealthy or ‘super rich’. However today Inheritance Tax is a real issue for a large number of people and the main reason for this could be UK house prices, which despite recent drops have still nearly doubled in average value since 2001. This has pushed many more estates over the Inheritance Tax threshold that would historically have had nothing to pay. From 2001 to 2011, average UK house prices have increased by 93%, while the inheritance tax threshold for the same period has only increased by 34%. Therefore even if this trend doesn’t continue, it is fair to say that many people may find themselves with an estate of sufficient value to warrant some careful planning.
