The government has released data that shows inheritance tax (IHT) receipts in 2019-20 decreased for the first time since 2009-10. HM Revenue & Customs (HMRC) received a total of £5.2 billion from IHT during 2019-20, which was a decrease of 4% (£223 million) on 2018-19.
The data also reveals that the value of exempted transfers to qualifying charities rose from £1.8 billion in 2016-17 to £2.8 billion in 2017-18.
Zena Hanks, a partner in the Private Wealth Team at Saffery Champness, comments:
“The rising value of residential property accounts for nearly 60% of the £35 billion increase in the value of estates over the past decade, yet George Osborne’s Residence Nil Rate Band (RNRB) is shifting much of the tax burden onto other assets and properties worth over £1 million.”
“According to HMRC, the RNRB is the reason why total IHT receipts have fallen in the last year, which some may see as evidence that the IHT system has become out of sync with the prevailing trends in the country’s wealth. Indeed, this may even include the Chancellor, who may be looking towards the transferral of residential property as a potential source of additional tax revenue needed to pay for the Coronavirus.”
“In the summer of 2015, the then Chancellor George Osborne introduced the RNRB in the belief that essentially middle-class families, most of whose wealth was tied up in the family home, should be able to transfer their property to their children without a punitive IHT charge. As of April 2020, and the raising of the RNRB threshold to £175,000 per person, which allows properties up to £1 million to be transferred on death to direct descendants IHT-free, that ambition looks to be largely fulfilled.”
“However, as we emerge from the Coronavirus pandemic and face up to the enormous debt which the country has accrued over the last few months, the Chancellor may feel it’s necessary to re-evaluate what constitutes a wealthy individual or household, and consequently middle-class families may pay the price in their IHT bill.”
