A new analysis carried out by the Office for Budget Responsibility (OBR) this week has estimated that Inheritance Tax (IHT) receipts are likely to soar to a new record high for the 2018/19 tax year.
The OBR has pointed out that, in the first six months of 2018/19, IHT receipts reached around £2.8 billion.
If things continue as they are, with an increasing number of middle-class families finding themselves liable to pay the tax, IHT receipts for the full financial year are likely to come in at around £5.4 billion – up from the £5.3 billion recorded in 2017/18, it claims.
Commentators have said that the analysis, which comes just days ahead of the Autumn Budget, will put additional pressure on Chancellor Philip Hammond to reform the IHT system when he steps up to the despatch box on Monday 29 October.
Earlier in the year, the Office of Tax Simplification (OTS) carried out a comprehensive review of Britain’s IHT framework, after the Chancellor himself said that the tax needed to be “simplified.”
Since then, little has been said about IHT and the OTS’ full report remains yet to be published.
Under existing rules, each individual can pass on up to £325,000 free of IHT. Any estates valued above this amount will then attract IHT at a rate of 40 per cent of their total value.
However, there are a number of ways that families can reduce the eventual amount of IHT they will pay, such as by making gifts, leaving money to charities in their Wills, or passing residential property to direct beneficiaries using the residence nil rate band (RNRB), which extends the amount they are able to pass on tax-free.
To find out more about how Palmers can help with Wills and Inheritance Tax planning, click here.