Recent analysis by Prudential has revealed that the total amount of inheritance tax paid in the 2012-13 tax year (the latest publicly available data) reached £3.05 billion, which is an increase of 15% on the £2.65 billion total paid in the previous tax year.
However, Prudential highlights that the figures don’t suggest that an increasing proportion of estates are becoming liable for inheritance tax. HMRC reviewed nearly 280,000 estates in the 2012-2013 tax year, and inheritance tax was paid by 6% of them, a figure that remained relatively flat over the course of five years but is much lower than in 2007-2008 when over 9% of estates were liable for inheritance tax.
Perhaps unsurprisingly, London and the South East remain the UK’s inheritance tax hotspots – between them they accounted for half of all inheritance tax payments in the 2012-2013 tax year.
The average inheritance tax bill was also higher in London than anywhere else in the country, with the average amount paid per liable estate totalling almost £236,000 – 38% higher than the national average.
The Prudential analysis revealed some significant fluctuations across the UK in the average increases in inheritance tax bills paid by eligible estates. Between April 2010 and April 2013 the average bill in Northern Ireland grew by a quarter (26%) and in the North East of England by just over 10%. In contrast, in the same time period the average bills in Scotland fell by almost 9% and those in Wales by 5%.
The Chancellor of the Exchequer announced in this year’s Summer Budget that from April 2017 individuals will be entitled to a family home allowance in addition to the existing £325,000 inheritance tax allowance. The family home allowance will be phased in and will be up to £1 million for a married couple or civil partnership by the 2020-21 tax year.
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