Inheritance tax to DOUBLE: HMRC preparing for windfall from death tax raid

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A new analysis undertaken by financial services company Canada Life says we will hit the landmark figure in barely a decade’s time. Last week it was revealed the total amount of inheritance tax collected by Her Majesty’s Revenue and Customs (HMRC) for the financial year end April 2019 was £5.4billion, up £200million on the previous year and £600million more than the £4.8billion collected in the year ending April 2017. After death, HMRC calculates the value of a person’s estate, made up of property, money and possessions, once all relevant debts have settled.

Everyone has an allowance for their total wealth which is free of inheritance tax, known as the nil-rate band.

The figure has stood at £325,000 for many years, and any estate worth more is subject to 40 percent inheritance tax.

Neil Jones, Canada Life’s market development manager, said: “The Government is receiving a windfall by keeping the nil-rate band frozen and limiting the use of the residence nil-rate band to those who own property and leave it to their children or grandchildren.”

There are various ways of getting round paying hefty inheritance bills, including a new allowance which includes a family’s main home.

As a result, than five percent of deaths triggered an inheritance tax bill last year.

However, the figure is predicted to rocket in the next few years as increasing numbers of middle-class, home-owning families find themselves swept into the tax-paying threshold.

In March 2019 inheritance tax receipts accounted for £537m, up from £372m in February 2019, an increase of 44 per cent.

Rachael Griffin, tax and financial planning expert at Quilter, told the Financial Times on Wednesday: “Receipts for April 2018 to March 2019 are 3.1 per cent higher than the same period last year and the 2018-19 tax year show that IHT receipts are at its highest level both in annual revenue and as a proportion of GDP.”

A report presented by the Office of Tax Simplification (OTS) to Parliament in November said Britain’s inheritance tax system was “complicated and confusing” and needed to be overhauled dramatically.

Paul Morton, tax director at the OTS, said: “The overall picture we gathered from people’s responses is that IHT is seen very much as an administrative burden.

“The overarching point that emerged is that IHT returns must be made even when there is no tax to pay.

“Returns are submitted in relation to about half of all UK deaths, even through IHT is payable on less than 5 per cent of deaths.”

The OTS has suggested inheritance tax forms need be simplified, and that the claims process should be moved online to reduce levels of complexity.

Mr Morton added: “The short form, called the IHT100, is only about eight pages long, which is not too bad, but the longer form, the IHT400, is 16 pages long with 92 pages of notes to go with it.

“Wading through all that is going to be quite difficult for a lot of people.

“If it was turned into more of an online tool – which guided people through the process – it would be a lot easier to navigate.”

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