• Inheritance tax (IHT) receipts fell for the first time in a decade in 2019/20 (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/903290/IHT_Commentary.pdf
• HMRC raked in £5.2 billion from IHT in 2019/20, down 4% (£223 million) compared to the previous tax year
• Introduction of the main residence nil-rate band in 2017/18 the main cause of reduction in IHT tax take
• IHT could be in Chancellor Rishi Sunak’s crosshairs ahead of Autumn Budget
Tom Selby, senior analyst at AJ Bell, comments:
“After a decade of rising IHT bills, the amount people paid in tax on death dropped £223 million last year. Despite this year-on-year fall, IHT charges still boosted the Treasury’s coffers to the tune of £5.2 billion in 2019/20.
“The primary reason for the recent decrease in both the proportion of people hit by IHT and the overall tax bill was the introduction of the main residence nil-rate band in 2017/18.
“This meant that, in addition to the main £325,000 per person IHT-free allowance, people could pass on their primary home to a ‘direct descendant’ without paying tax on the first £100,000.
“This main residence nil-rate band has increased by £25,000 each year since 2017/18, reaching £175,000 at the start of the current tax year. It is due to rise in line with Consumer Prices Index (CPI) inflation from 2021/22 onwards.
“The aim of the policy, announced with huge fanfare by former Chancellor George Osborne, was to allow family homes worth up to £1 million to be inherited tax-free. This can be achieved by a couple combining their IHT allowances.
“However, given the parlous state of the nation’s finances, it would be no surprise to see Osborne’s big IHT giveaway come under the microscope as his successor, Rishi Sunak, seeks ways to raise much-needed cash to pay for the nation’s eye watering COVID-19 debts.”
