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UK Inheritance Tax Receipts Reach Record Levels

But exacerbate the housing crisis ...


Posted by Roger Eddowes on 13/05/2024 @ 8:00AM

Inheritance tax is imposed on the estate of a deceased person before it is distributed to their beneficiaries. In the UK, this tax is levied at a rate of 40% on estates worth over £325,000. This threshold has remained unchanged for over a decade ...

The government needs to address this Inheritance Tax issue urgently!

The government needs to address this Inheritance Tax issue urgently!

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And that's despite the rising value of assets and properties. As a result, more and more families are being affected by this tax, which was originally intended to target only the wealthiest individuals.

The Office for Budget Responsibility has forecasted that inheritance tax receipts will continue to rise, reaching a staggering £9.7bn a year in 2028/29. The Institute for Fiscal Studies has also predicted that the number of estates liable for inheritance tax will rise to over 7% by 2032/33.

These alarming statistics paint a grim picture for UK homeowners, especially for those with valuable assets and properties!

One of the main reasons for the significant increase in inheritance tax revenue is the frozen threshold. With the threshold remaining unchanged for over a decade, more and more families are being caught in its grasp. This, combined with the rising value of assets and properties, means that even middle-class families are now facing hefty inheritance tax bills. This is a stark contrast to the original intention of the tax, which was to target only the wealthiest individuals.

The freeze on the inheritance tax nil rate band has also created a ripple effect in the housing market, exacerbating the already dire housing crisis. As the threshold remains unchanged, older homeowners are incentivised to remain in larger homes to capitalise on the allowances.

This has resulted in a shortage of properties in the market, making it difficult for younger buyers to get onto the property ladder. This, in turn, has a domino effect on the entire housing market, creating a vicious cycle.

The Building Society Association (BSA) has called on the government to review inheritance tax and make necessary reforms to alleviate the pressure on UK homeowners. The BSA argues that the current tax system is 'ineffective' and is incentivising older homeowners to remain in larger homes, creating a shortage of properties in the market.

"They suggest tax breaks on family homes should be removed!"

This would encourage older homeowners to downsize, freeing up more properties for younger buyers. They also recommend other measures, such as regulatory changes that would allow lenders to issue more 5% deposit mortgages. This would provide more liquidity in the market, allowing families to move up and down the property ladder, and freeing up more first-time buyer homes.

While the record-high inheritance tax receipts may seem like a positive sign for the UK's economy, it has also brought to light the pressing issue of the exacerbation of the housing crisis. The frozen threshold, combined with rising asset values, has resulted in more families being affected by the tax than originally intended.

I feel the government needs to address this issue urgently to ensure that inheritance tax does not continue to exacerbate the housing crisis.

Until next time ...

Business Godparent


Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more about Inheritance Tax, it may be a great idea to call me on 01908 774320 and let's see how I can help you.

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About Roger Eddowes ...


Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.

Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.