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21 Aug 2014

Inheritance Tax Revenues Will Rise to £5.8bn by 2019 Tax Year – Plan Ahead

Over the next five years, almost a quarter of a million deaths will result in Inheritance Tax (IHT) liabilities for those who benefit from a relation´s legacy, according to June figures from the Office of Budget Responsibility (OBR).

Reported by the Financial Times, after suffering during the financial crisis when IHT receipts by HM Revenue & Customs (HMRC) fell sharply (following peak figures of £3.8bn in 2007-08), collection of the tax recovered to £3.4bn in 2013-14, a 9% rise year-on-year. And the OBR is forecasting faster revenue growth in the coming years – by the 2018-19 tax year, the fiscal watchdog is predicting that the Treasury will collect £5.8bn in IHT.

The rising forecast is due to inflation in asset values, says the publication. Despite the nil-rate band being raised to £325,000 back in 2009 (and set to remain at that level until 2018), inflation, particularly house prices in London and the Southeast, is expected to push thousands of estates above the static threshold each year.

In June, the OBR estimated that the proportion of deaths incurring IHT liabilities would rise to 8% by 2015-16 and again by 2018-19, to 10%. And the effective rate of IHT on estates with liabilities will also rise, said the OBR. So the Revenue is set to benefit an extra 5.9 per cent in 2013-14 to 7.8 per cent in 2018-19 as the average effective rate increases as the value of estates rises.

However, there are a number of steps you can take to safeguard your loved-ones from the so-called ‘death duties´ says an article in the Telegraph´s Money Services. Adequate planning is the way to ensure that more of your estate will be inherited by those you want to benefit from it.

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