Posted by Richard Willett - Memes and headline comments by David Icke Posted on 24 April 2024

Taxing what has already been taxed: Bereaved families paid a record £7.5bn inheritance tax last year – here’s how IHT works

Bereaved families handed a record £7.5billion in inheritance tax to the Treasury last year, new official figures show.

That is a jump from £7.1billion in the previous tax year, and notches up the third record annual haul in a row.

The property price boom over recent decades combined with frozen thresholds is dragging more families into the inheritance tax net, and the Government is raking in ever bigger sums as a result.

The Office for Budget Responsibility forecast last month that inheritance taxreceipts will reach £9.7 billion a year in 2028/29.

Despite rumours the Government planned to ease the burden of the controversial tax, it failed to announce changes in the Autumn Statement or Spring Budget, and proposals are now expected to be revealed in its election manifesto.

Only the richest 4 per cent of families pay inheritance tax, which is 40 per cent on any assets over the threshold of £325,000, or £500,000 if you are leaving a property to your direct descendants.

However, those who do pay the tax can be hit for tens or hundreds of thousands of pounds.

The standard nil rate band for inheritance tax is £325,000 but couples who are homeowners can leave an extra £175,000 each of property wealth from their main residence to children and grandchildren. This creates a maximum total IHT-free amount of £1million for a married couple with direct descendents.

The Institute for Fiscal Studies recently estimated that the number of estates liable for inheritance tax will rise to more than 7 per cent by 2032-33. Last week, the IFS called for an inheritance tax raid on unspent pension pots and other loopholes, with the funds used to lower the overall tax rate.

If the Government decides to reduce inheritance tax, its main options are cutting the headline rate, raising or reforming thresholds, and changing gifting rules.

How much is inheritance tax and who pays?

You need to be worth £325,000 if you are single, or £650,000 jointly if you are married or in a civil partnership, for your loved ones to have to stump up death duties.

This threshold is known as the ‘nil rate band’.

But there is a further chunky allowance which increases the threshold to a joint £1million if you have a partner, own a property, and intend to leave money to your direct descendants.

This is called the ‘residence nil rate band’.

Once an estate reaches £2million this own home allowance starts being removed by £1 for every £2 above this threshold. It vanishes completely by £2.3million.

If you are worth more than this, your beneficiaries will have to hand over 40 per cent of your assets above those levels to the Government.

Read More: Bereaved families paid a record £7.5bn inheritance tax last year – here’s how IHT works

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