HMRC's IHT receipts have seen an increase of around £160m in just a year to a record high of £5.4bn in the 2018/19 tax year, up 3.1% this March from £5.2bn in the previous fiscal year, the latest figures show.
"It is another record year for the amount paid in inheritance tax," Neil Jones, wealth management and tax specialist at Canada Life said in a statement. "This continues a consistent, long term trend of increases that shows little sign of slowing down," he added.
Inheritance tax saw a hike in March 2019, a 44.4% increase from the previous month, and the government is at a loss for the reason behind it. "March 2019 is also particularly high though it is too early to determine the cause for this," HMRC said.
Taking money from a grieving family who are burdened with the loss of a loved one and sorting their affairs, sounds like something a villain from a Dickensian novel would do. Unfortunately, it’s a very real activity in the modern day and one that is reaping more and more revenue for the government"
"Taking money from a grieving family who are burdened with the loss of a loved one and sorting their affairs, sounds like something a villain from a Dickensian novel would do. Unfortunately, it's a very real activity in the modern day and one that is reaping more and more revenue for the government," Rachael Griffin, tax and financial planning expert at Quilter said.
"We may see the tax take fall somewhat next month as on April 6th the government increased the residence nil-rate-band (RNRB) to £150,000, which gives people an additional threshold before IHT becomes due on their estate and which they say will remove some of the IHT sting.
"However, research from Big Window for Quilter shows that despite the residence nil rate band being in effect since 2017, just 41% of people are aware of this complicated part of the inheritance tax landscape. Further to this, under half of respondents were aware of other fundamental inheritance tax rules such as the £3,000 gifting limit (46%) or the £325,000 nil-rate-band (43%)." she added.
Canada Life underscores that effective planning may cut the amount of IHT payable.
"Just as consistent is that a lot of these payments are preventable. Death and taxes may be the only two certainties in life, but with careful planning around the former, some of the latter is unnecessary. It's crucial to use any reliefs, exemptions and allowances. Starting any planning early is essential and there's a range of trusts available that can enable clients to make sure more of their money goes to beneficiaries whilst reducing the amount of tax payable when they die. Some of these trusts work on a seven year, rolling basis, so even though they've been able to - tax efficiently - pass on money once, they can do it again," Neil Jones said.
Quilter is still concerned that there isn't enough public awareness on how to deal with such a complicated tax such as IHT.
"The very fact that people have to be asked which, of numerous complex allowances are available to them is a terrible sign itself. And it is made worse by the woefully low proportion that are aware of them. Government claims that it has given the public all the tools it needs to navigate this tax system, but it's as complex as assembling flat pack furniture with instructions written in a foreign language.
"In the modern world families are increasingly becoming more complex and we need a tax regime which functions with this in mind. The RNRB depends on a number of factors, including your marital status and who inherits the family home. These kinds of rules should be rethought so people have the freedom to gift to whoever they want and are not constrained by antiquated societal rules. A simple IHT regime gives people far greater opportunity to best plan their estates and make the most difference to future generations," Rachael Griffin said.