Inheritance Tax bills skyrocket – where families are worst hit in UK

Inheritance: Expert gives advice on 'good planning'

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Research carried out by financial services firm NFU Mutual found that there were 22,100 deaths in 2018/19 that resulted in an IHT bill. This meant the average bill came to £209,502, which is an increase of six percent from £197,521 the previous year.

While only 3.7 percent of deaths in the country resulted in an Inheritance Tax bill in 2018/19, this amount is expected to increase following Chancellor Rishi Sunak’s decision to freeze the tax-free allowances for the next five years to help pay the coronavirus bill.

In NFU Mutual’s research, the firm discovered that almost two-thirds of estates affected by IHT resided in the country’s southern and eastern regions.

Some 64 percent of the tax take came from the UK’s South East, London, East of England, and South West.

Londoners had the highest bills across the country in 2018/19, paying an average of £271,820.

Conversely, the North West saw the lowest average tax bills within England, with those obliged to pay the tax having to part ways with around £152,898.

In comparison, Scotland, Wales and Northern Ireland only accounted for 25 percent of Inheritance Tax bills.

Only 252 people across Northern Ireland paid IHT during the tax year, however the group paid a staggering £40million between them over the period.

READ MORE: HMRC warns millions of Britons are missing out tax savings

Some 654 people paid Inheritance Tax in Wales at the same time, resulting in an average bill of £155,963.30 each.

In Scotland, only 1,190 people paid an ITH bill during the 2018/19 tax year, with an average bill of £195,798.32 each.

Inheritance Tax is charged on the estate of someone who has recently died and is passing on their assets to loved ones.

An individual’s assets can include their property, certain possessions and money, according to HMRC.

At the moment, the standard IHT rate is 40 percent, however it is only charged on the part of an estate that’s above the threshold of £325,000.

No tax is charged on any assets or components of the estate which are left to spouses or civil partners.

Earlier this year, Mr Sunak announced the freezing of two allowances for the tax for a further five years.

Due to this, the nil-rate band will remain at £325,000 for the foreseeable future and the residence nil-rate band will stay at £175,000 until 2026.

However, this is not a new change as the nil-rate band for IHT has remained at £325,000 per person since April 2009.

Despite remaining unaltered for 17 years, house prices across the UK have risen dramatically over the period.

Sean McCann, a Chartered Financial Planner at NFU Mutual, outlined what the public can do to reduce their IHT bills going forward.

Mr McCann said: “Inheritance Tax is feared by many but paid by relatively few.

“But with the average bill in excess of £200,000, it can make a significant dent in a family’s wealth for those that do get caught in the net.

“With the tax-free allowances frozen for the next five years, rising asset prices and a heated housing market, a growing number of families will be impacted.

“It’s critical that families concerned about being caught by inheritance tax seek advice as early as possible. The earlier you plan the more options you have to mitigate any potential bill.”

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