Average inheritance tax (IHT) bills in the UK were just under £200,000 ($256,000, €229,000) for the 2018-19 tax year, according to analysis by financial advice firm NFU Mutual.
It looked at HM Revenue and Customs (HMRC) receipts and found around 27,000 families were hit with IHT bills, helping to bring in a record £5.4bn in tax revenue.
In the previous financial year to April 2018, average IHT bills were just over £200,000 on average, but there were only 26,000 taxpayers, which made generated only £5.2bn for HMRC.
“Times have changed, and the IHT system hasn’t kept up,” Jason Witcombe, chartered financial planner at Progeny Wealth, told International Adviser. “We have been calling for simplification for years but HMRC has continued to merely tinker and obfuscate while regular families continue to suffer.”
Samantha O’Sullivan, partner in the private client team at law firm Royds Withy King, told IA: “Although the current IHT rules allow for up to £900,000 of assets to be passed on to your beneficiaries tax-free, for many people the amount that they can pass on will be much smaller.
“The maximum allowance is only available to someone who has survived their spouse or civil partner, and only if they leave assets to the ‘right’ beneficiaries.
“If you and your partner are not married, if you are unmarried or divorced, or if you have no children, the maximum allowance potentially is only £325,000, a figure which has not been increased since 2009.
“Planning ahead is therefore incredibly important, to ensure that your beneficiaries are protected.”
Over the years
Average bills were comparatively low at £141,000 five years ago, and were on the rise until declining last year.
The number of IHT taxpayers has decreased from its 2016-17 peak at 30,000.
Despite the introduction of the Residence Nil Rate Band, a complex tax break on family homes, in April 2017, IHT receipts have surged, increasing every year since 2014-15.
Daniel Grainge, partner and head of tax at accountants Kreston Reeves, told IA: “The increase in IHT paid over recent years, both in terms of the absolute amount of tax collected, and the average payable by estates, can be largely attributed to the increase in property prices over the past 10 years.
“Whilst the Residence Nil Rate Band has been introduced this is incredibly complex and does not benefit individuals with estates of more than £2.3m.”
| Tax year | Total IHT receipts | No. of taxpayers |
Average IHT bill |
| 2018-19 | £5.369bn | 27,000 | £198,852 |
| 2017-18 | £5.205bn | 26,000 | £200,192 |
| 2016-17 | £4.824bn | 30,000 | £160,800 |
| 2015-16 | £4.650bn | 29,000 | £160,345 |
| 2014-15 | £3.804bn | 27,000 | £140,889 |
Source: NFU Mutual
Burden of IHT
HMRC statistics also revealed around 5,000 individuals paid IHT last year while they were in fact still alive.
In many cases this will be due to gifts into certain types of trust, which can trigger an IHT bill.
Neil Jones, wealth management and tax specialist, Canada Life, told IA: “With careful planning there’s an enormous amount that can be done to reduce the burden of IHT, be it making payments in to trusts, ensuring assets are in a more tax efficient form, and even making full use of allowances.
“The first step for families is always to see an adviser and have a frank, clear-eyed conversation about the value of the estate and who they would like to benefit from it.”
