Families to pay an extra 900 million in inheritance tax
An expected £900m extra in Inheritance Tax will be paid by 2022
In March 2017, The Office for Budget Responsibility published figures showing that £32.4 billion in Inheritance tax would be collected between 2016 and 2022, but in new figures published with the November Budget, the figure anticipated to be paid to HMRC over that period has now been increased further by almost £1bn.
The Office for Budget Responsibility is anticipating an additional £200m per year in inheritance tax to be paid for the coming tax years 2018-19 and 2019-20, but the biggest change lies with the 2017-18 tax year, as an estimated £300m over the initial estimate of £5bn will be collected.
The main cause for the increase is the higher than anticipated mortality rates, with the number of deaths of those above state pension age being larger than originally predicted and new figures showing a total average of 502,000 against the 476,000 initially estimated. However, this is expected to decrease by around 1.2 percent by 2022 as the numbers of population in the pensionable age group fall.
Other contributing factors are seen to be the increase in property prices, the expected higher probate fees and stricter policies from HMRC to eliminate tax avoidance debts.
As house prices continue to rise, additional revenue from this will be forthcoming. But, some of this may be offset by the increase in the nil-rate bandwidth which rises from £100,000 to £125,000 in 2018-19 and increases again to £175,000 by 2020-2021. However, this will only apply to direct descendants such as children, grandchildren, stepchildren, foster and adopted children, with many others having to pay more than they were expecting.
In addition, the HMRC’s revitalised focus on tax avoidance is considered to be another large influencing factor on these figures. With many loopholes now being closed, the result will again see the inheritance tax contributions increasing.