IHT – The Statistics
We can learn much from looking at some of the basic statistics that revolve around Inheritance Tax, both in terms of seeing how the tax is impinging more and more, but also in relation to how it might be avoided or mitigated.
IHT receipts according to the official figures have increased in the year up to 5 April 2013 to £3.1 billion, with some 20,000 estates paying the tax.
This total tax take is up by nearly one third from 2009/2010, albeit the figure in that year was a multi-year low.
The highest IHT tax take was in 2007 when £3.9 billion was collected.
Prior to 2007 IHT had been steadily increasing year on year.
The amount of tax collected is closely correlated to house prices.
We can therefore expect to see further increases in the amount of IHT collected over the coming years, especially with the backdrop of frozen allowances (the Nil Rate Band).
20,000 estates paying £3.1 billion means the average estate pays approximately £155,000 in IHT.
£3.1 billion collected by HMRC is a tiny proportion of all tax collected, around 0.6%. For every £1,000 collected in taxes by the government around £6 comes from IHT.
These core numbers tell us a lot:
- Not that many people/families end up paying IHT, but the number being caught up is increasing.
- However where it does bite, it can bite hard.
- It is a fairly useless tax in terms of contributing to the country’s overall financial requirement.
- It is much more of a ‘political’ tax.
- It is a tax which is correlated to house prices.
PLUS, as we already know, it is largely a voluntary tax, one which can be avoided by just about anyone who decides to do a bit of forward planning.
Given some of the numbers described above it does make you wonder why anyone would allow their estate to be caught up by this tax.
For those who want to leave a legacy for the general good of the country it can be seen that the value to UK PLC of IHT is very small, hardly making a dent in the government’s wider income requirements.
In these cases, the better way forward surely, is to use charitable gifts and their preferred tax status to create a dedicated legacy?