Inheritance tax receipts increase £793million due to spike in house prices

The taxman took in an additional £739million in inheritance tax receipts in the financial year 2020 to 2021 compared to the previous year.

Analysis from probate group Final Duties found the Treasury pocketed a total of £5.57billion during the year, on almost 27,000 estates, with an average bill of £213,485.

The region that paid the highest amount was London, at £1.34billion, while the south east had the most inheritance tax bills, with 5,650 estates hit by the levy.

Analysts at Final Duties credited the rise in tax receipts to the increase in property values prompted by the stamp duty holiday, which ran from July 2020 to June 2021.

Jack Gill, managing director of Final Duties, warned Britons to check if their home could mean their estate is liable for the tax.

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He said: “Many people may not believe themselves to be wealthy as such, however, their home is likely to pull them into inheritance tax territory should they fail to properly prepare to mitigate.

“Unlike other assets such as investments, a property can’t be as easily transferred or gifted, and this is why more and more people are falling foul of the inheritance tax trap.

“While house prices may be cooling slightly, they remain close to historic highs and this is largely why the Government expects to pocket £7billion a year in inheritance tax over the next five or so years.”

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The area that had the largest percentage increase in inheritance tax bill in the 2020 to 2021 tax year was the West Midlands, where the amount of tax received increased 33 percent.

Inheritance tax receipts have continued to increase this year with monies from the tax increasing £400million between April and September compared to the same period last year.

HMRC raked in £3.9billion in the six-month period. Calculations from Wealth Club suggest the average bill could increase to £233,000 this tax year, with over 30,000 families landing a bill.

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Nicholas Hyett, investment manager at Wealth Club said: “Inheritance tax has found itself the unexpected centre of the UK’s political battlefield.

“The tax pulled in over £7billion for HMRC last year and the most recent set of numbers suggests that’s set to climb again. Both the average bill and the number of families paying inheritance tax are also set to rise in the years ahead, according to Wealth Club research.

“Whether you think inheritance tax is a great means of wealth redistribution or an unfair tax on those who’ve already been taxed once – the future of the UK’s most controversial tax is worth arguing about – and people are.”

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