IHT receipts hit £1.9bn in the first four months of the tax year, despite a rise in the number of claims for the increased tax break on family homes.
Information provided to financial advice firm NFU Mutual under the Freedom of Information Act shows only 5,420 taxpaying estates successfully claimed for the Residence Nil Rate Band (RNRB), an additional tax break of up to £100,000 on the family home introduced in April last year.
The numbers have dramatically increased in this tax year with 3,490 taxpaying estates claiming the RNRB, which has risen in value to £125,000, up to the end of July. However, more than 24,000 estates pay inheritance tax each year, according to the latest official figures.
Thousands of estates are missing out on a tax break that could save up to £50,000 in inheritance tax or up to £100,000 for a married couple or civil partners because of the complicated rules that exclude those without children and many business owners.
NFU Mutual chartered financial planner Sean McCann commented: ““This tax break does nothing to change the perception that inheritance tax is fiendishly complex and unfair.
“The conclusion of the Office for Tax Simplification’s review of IHT can’t come soon enough. It’s plain to see that in many instances the complexity of the rules means that many people are missing out.
“The residence nil rate band is only available to those leaving their home to ‘direct descendants’ which unfairly penalises those without children who want to pass on their house to nieces, nephews, brothers or sisters.
“Many business owners also miss out on some or all of the extra relief on the family home, if their total estate including their business exceeds £2m. This is because the value of the estate is tested before applying Business Property Relief.”
Subscribe to our newsletter to receive breaking news by email.