HMRC reports fall in deaths resulting in IHT charge

The proportion of deaths in the UK resulting in an inheritance tax (IHT) charge has seen a 0.2% decrease, new HMRC figures have revealed.

Figures showed that the 2018/19 tax year saw 3.7% of all death result in an IHT charge, which was down on the figure for 2017/18. According to HMRC, this was likely due to the phased introduction of the Residence Nil-Rate Band (RNRB) tax-free threshold from April 2017.

The government’s latest figures also showed the total number of UK deaths that resulted in an IHT charge has also fallen. In 2018/19, there were 22,100 such deaths, a fall of 2,100 (9%) since the 2017/18 tax year. This was also likely a result of the continued phased introduced of the RNRB.

HMRC recently confirmed that IHT receipts it received during the 2020/21 tax year reached £5.4bn, a 4% rise equal to £190m compared to 2019/20.

This reversed the fall seen the year prior and meant receipts have been broadly flat across the four years since the tax year 2017/18. Receipts remain below the peak seen in the 2018/19 tax year by around £33m.

Responding to the figures, Killik & Co head of wealth planning, Svenja Keller, said: “Estate planning is a big topic but it shouldn’t be avoided. Whilst it can be difficult to make large gifts or use other planning solutions when the family is still young, it is wise to go through the process of thinking about it early.

“Even if the result of the conversation is concluding you will only do small things now but plan to do more in the future, at least the family knows where they stand.”

Keller added: “There are many complex estate planning solutions out there. They can work but they come with cost and complexity. Whilst an inheritance tax saving of 40% can be significant, it needs to be set against the costs that are incurred for the advice and to keep the structure going for the long-term.

“In addition, estate planning is long-term and a lot of these structures can be inflexible, which means once you are in them it is difficult to unravel them if circumstances or legislation change.”

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