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The report that inheritance tax (IHT) should be scrapped and replaced with another system by think tank, Resolution Foundation, demonstrates how it is a ‘Marmite’ tax.
Those who like it see it as a way of redistributing wealth, whereas those who hate it view it as an additional tax paid on assets on which they have already paid income tax, or perhaps previously paid IHT when it was inherited.
During the tax year which has just ended in April 2018, the government collected just over £5.2bn of IHT, an increase of seven per cent from the previous year.
Looking back to the depths of the recession in 2009/10 the IHT raised was just under £2.4bn.
The IHT collected has more than doubled in the last eight years and is well in excess of the previous high point, £3.8bn, in 2007/08.
One of the undoubted reasons for the increased IHT paid has been the freezing of the nil rate band, the first part of an estate on which there is no IHT.
It has been fixed at £325,000 since 2009 and is scheduled not to change until 2020.
However as house prices continue to rise, even with the introduction of the residence nil rate band, the amount of IHT payable by even modest estates will continue to increase unless action is taken to increase the nil rate band.
As with all taxes careful planning can pay dividends but as the wealth gap appears to be increasing there is bound to be political tension between those who wish to see IHT, or a replacement for it, address and redistribute the wealth gap and those who believe that an individual should be free to pass their wealth on as they think fit, with minimum state intervention either by way taxation or restrictions on the ability to direct who receives their estate.
With the Office of Tax Simplification reviewing IHT, the next few years are therefore going to be interesting in the wealth tax arena.
Head of tax,