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Latest official IHT data

ended 26. July 2023

This morning, the ONS has just published the latest official IHT data for the tax year 2020 to 2021. You can read the full report >> here << but key points below. UK newswire, Newspage, asked IFAs and tax experts for their thoughts, below.

  • The total number of UK deaths that resulted in an IHT charge has increased. In the tax year 2020 to 2021, there were 27,000 taxpaying IHT estates, an increase of 4,000 (17%) since the previous tax year, 2019 to 2020.
  • In the tax year 2020 to 2021, 3.73% of UK deaths resulted in an Inheritance Tax (IHT) charge, decreasing by 0.03 percentage points since the tax year 2019 to 2020. This means the proportion has been relatively flat since the tax year 2017 to 2018 - likely as a result of the introduction of a new tax-free allowance known as the Residence Nil-Rate Band (RNRB) from that year onwards. The RNRB is available to those estates that transfer their main UK residence to direct descendants on their death.
  • IHT tax liabilities created in respect of the tax year 2020 to 2021 were £5.76 billion. This was a rise of £0.8 billion (16%) compared to the previous year. The rise in IHT tax liabilities created is likely due to the rise in the number of overall deaths in the UK in that year, which resulted in a knock-on rise in taxable wealth transfers. The number of deaths in the UK rose from 612,000 to 722,000 (18%). This rise in overall UK deaths will have been due, at least in part, to the effects of the COVID-19 pandemic.
  • The largest exemption set against assets continues to be for transfers between spouses and civil partners. In the 2020 to 2021 tax year, £15.7 billion was transferred to surviving spouses and civil partners on death, a rise of £2.7 billion (21%) on 2019 to 2020. This exemption was used by 24,000 estates above the Nil Rate Band (NRB) in the tax year 2020 to 2021.
  • The combined value of agricultural and business property relief (APR, BPR) was £4.2 billion in the tax year 2020 to 2021. This was an increase of £1.4 billion (51%) compared to the tax year 2019 to 2020. Most of this increase was concentrated in the value of BPR, which increased by £1.3 billion. The value of APR increased by only £91 million.
  • The value of exempted transfers to qualifying charities also increased, to £1.8 billion in the tax year 2020 to 2021 from £1.6 billion in the tax year 2019 to 2020.

2 responses from the Newspage community

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Editor
Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
With the thresholds for IHT frozen until 2026, without proper planning, we can see the number of people having to pay inheritance tax increasing.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
The government collected almost £6bn in inheritance tax in the year. That is £6bn of wealth that should have gone to the children and beneficiaries of hard-working families. That is also £6bn that has already been subject to other taxes during people's lives, such as Income Tax, Capital Gains Tax and Value Added Tax to name just a few. The sooner this tax is removed, the better.