Stealth seizure of inheritance tax now costs families £150,000

“Even those who don’t consider themselves too wealthy may find their assets fall into this category,” said Amy Pethers of wealth manager Brewin Dolphin.

For those affected by inheritance tax, the sums can be exorbitant. “It’s not uncommon for an inheritance tax bill to be in the hundreds of thousands of pounds,” said Rob Morgan, of investment service Charles Stanley. “Families could struggle to pay big bills and therefore be forced to make tough choices – like selling a family home.”

Government revenue from inheritance tax has been rising steadily since the zero rate band was first frozen. For the 2020 to 2021 tax year, more than 22,000 deaths in the UK – 3.7% of the total for that year – resulted in inheritance tax, compared to 2.7% in 2009 to 2010.

This is partly due to the sustained increase in property prices over the years, which means that the value of individuals’ property has increased.

Recognizing that more and more estates were becoming subject to inheritance tax, in 2017 the government introduced the zero-rate residency band, which is an allowance to pass on the family home without paying inheritance tax. Yet the zero rate residency bracket also remains frozen at £175,000 – although the average UK house price rose by £48,000 between February 2020 and March 2022 to reach £278,000, according to the Land Registry data.

Mr Morgan warns that as a result the number of families trapped in inheritance tax will continue to rise. He said: “People who a decade ago would never have approached the threshold may well find themselves there, particularly those who live in areas of the UK where property prices have been particularly dynamic.

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