Inheritance tax has always been something of a controversial issue in the UK, not to mention an important topic on several pre-election campaign trails. Nevertheless, it seems like one public headache that isn’t going to go anywhere in the near future. In fact, a think tank has suggested that going forward, there will be a massive increase in the number of people forced to pay inheritance tax.
According to the pages of a report published this week by the Institute for Fiscal Studies, the past ten years have seen the number of elderly people planning to leave large sums of cash to next of kin increase by more than 100%. From 2003 to 2013, research suggests that the overall wealth of the 80+ age group in the United Kingdom has increased by a whopping 45%. The report also stated that close to 45% of over-80s now expect to leave behind at least £150,000 to beneficiaries, a huge increase from the 24% noted at the beginning of the study period.
Those behind the study suggested that the increase in personal wealth and inheritance amounts could be attributed to both high home ownership rates among older generations, combined with skyrocketing property values up and down the country. Consequently, more people receiving cash and property from deceased relatives are finding themselves facing inheritance tax bills than ever before – the total collected in death duties last year having rocketed beyond the £4 billion mark for the first time.
Inheritance tax is payable when an estate passed on is valued in excess of £325,00 for an individual or £650,000 for a couple. As promised, the government intends to gradually increase the individual sum by £175,000 over the coming years, in order to reach a new threshold of £500,000 per individual by 2020, or £1 million for a couple.
“Our findings are consistent with separate data which shows that more and more people are continuing to find they are leaving large inheritances and being pushed over the inheritance tax threshold,” said Andrew Hood, an economist at the IFS.
Hood explained that over the years to come, more middle-class families should find themselves less liable for inheritance tax payments and the threshold continues its increase to the end of the current decade. Nevertheless, he also spoke of the difficulties younger generations may face going forward in accumulating their own wealth and getting on the property ladder.
“Today’s elderly have much more wealth to leave to their children than their predecessors did, primarily as the result of higher home ownership rates and rising house prices,” he added.
“At the same time, today’s young adults will find it harder to accumulate wealth of their own than previous generations did, due to the sharp fall in home ownership for that group, the dramatic decline of defined benefitin the private sector and the stagnation in their incomes.””
He also warned that while the picture will become more agreeable for middle-class families from 2020 on, there may be a period in the meantime where even more find themselves facing hefty inheritance tax bills.
If you’re think you might have an IHT issue call Haven today on 0161 495 9340.