The figure the tax man receives from inheritance tax has risen by a staggering £400 million – to the tune of £3.7billion.
This huge increase shows that tens of thousands of middle-income families are being sucked into paying a levy, which was once only intended for the wealthy.
How is this tax applied?
The tax is works out at 40 per cent of the value of any estate that is worth more than £325,000, or £650,000 for married couples.
However, rising property prices means that more middle-income families are being dragged into the inheritance tax this year.
According to the Office for National Statistics, the average UK home is now worth £271,000. In London, it is £501,000.
Andy Silvester, of the Tax Payers’ Alliance, said: ‘By refusing to move the thresholds in line with property prices, successive Chancellors have sneakily used this Death Tax as an increasingly lucrative way of topping up the Treasury coffers.
Howard Cox, founder of the Fair Home Tax Campaign, said the Treasury was using the tax as a ‘reliable income stream’.
He said: ‘Inheritance tax used to be a levy on the rich, but with property values growing far faster than inflation, this insensitive tax now impacts on all who own an average-value house.’
According to a recent survey by the group, 80 per cent of those surveyed were of the opinion that inheritance tax needed urgent reform.
These figures from the HMRC, also illustrate that home-owners are being hit the hardest – as they now have to pay enormous stamp duty bills.
Britons paid £30billion more in stamp duty alone in 2014, while the tax man pocketed £10.9billion on the purchase of residential and commercial properties.
This rise mirrors the soaring property prices, which increased by double digits last year.
Many families will be hit by stamp duty and inheritance tax. However, families will soon be able to hand their pension pots down tax-free.
What about the future?
The Chancellor announced that 55 per cent ‘death tax’ on pension pots, which is directly handed out to children will be scrapped.
This means, if a pension-holder dies before age 75, there will be no tax added. If they are over 75, then beneficiaries will only pay income tax as they withdraw cash.
However, if any of the pot remains when the beneficiary dies, they can pass it on again with the same tax benefits – allowing pensions to pass down through generations.
What are your thoughts on the costs of inheritance tax?
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