A leading think tank has warned that in the next few years inheritance tax (IHT) paid could reach its highest level in more than four decades.
The Institute for Fiscal Studies (IFS) said in April that the government’s Office for Budget Responsibility (OBR) had forecast that IHT will have raised £3.5 billion in 2013-14 and that this will increase to £5.8 billion in 2018-19.
The IFS said: “If the increase materialises, this would bring receipts as a share of national income to a level slightly above the previous peaks in 2007-08 and 1986-87…and would be the highest level of receipts since at least 1973-74.
“The numbers paying IHT are also forecast to increase sharply from just 2.6 per cent of deaths in 2009-10 to 9.9 per cent of deaths in 2018-19.”
The institute said the IHT regime needed reform, with options including abolishing the tax altogether, raising the threshold above which it is payable – currently £325,000 – to £1 million, or taxing individuals “at progressive rates on the total amount of gifts and inheritances that they receive over their lifetime”.
It added: “Less radical reforms to IHT could also improve it by reducing the scope to avoid the tax. Such a package of reforms could involve removing or reducing the reliefs given for agricultural land and business assets and extending the reach of the tax to gifts made more than seven years before death…But whatever happens IHT should not live on in its current form.”
Tim Steele, a partner in Palmers’ Wills, Trusts and Probate team, whose expertise includes inheritance tax planning, said: “Expert advice and early planning are key steps to maximising IHT efficiency.
“With rising property prices meaning that more and more people face a potential liability to inheritance tax – which is charged at 40 per cent on estates valued at above £325,000 – obtaining advice from legal professionals experienced in estate planning is a sensible step to ensuring that no more IHT is paid than necessary. For more information, please contact our Wills, Trusts and Probate team.”