The number of UK estates liable for Inheritance Tax (IHT) is forecast to rise by 15 per cent to around 30,000 this year, according to HMRC tax data.

This year’s figures compare to the 26,000 estates liable for IHT in 2015/16. The overall number of estates liable for IHT has almost doubled since 2008/09, rising by 87 per cent from 16,000.

The combination of steadily rising UK property prices and strong gains in investment portfolios over the past year has pushed a whole tranche of estates over the ‘nil-rate band’ of £325,000 (£650,000 for couples), so that they are potentially liable to IHT at 40 per cent.

According to Nationwide data, UK house prices rose by 4.5 per cent in 2016, while the FTSE 100 Index enjoyed a 14.4 per cent rise, with share price gains mirrored in other markets globally.

 Why such a big rise?

The government’s decision to freeze the nil rate band at £325,000 in 2009. The band, which sets the level up to which no IHT is applied on an estate, may be revised in 2019.

A move intended to counterbalance the rising number of IHT-qualifying estates; the Residential Nil Rate Band (RNRB) will be phased in from 6 April 2017. 

It will give individuals the opportunity to pass on up to an additional £175,000 of residential property to their direct descendants free of IHT, meaning that a couple will in effect have a NRB of £1 million after April 2020.

The government’s decision to freeze the nil rate band until at least 2019 means many more families are likely to find they are liable for IHT in the coming years.

If you believe you are affected by Inheritance Tax, contact us on 0141 572 1340 or enquiries@mccreafs.co.uk to discuss how we can help.  You can also read a little more here about how we can help.