Tuesday, October 13, 2009

IHT receipts FALL under Labour - what's going on?

The Guardian reports that: Inheritance tax drops to all-time low under Labour. Can this be right?

HMRC's website reveals a document dated Sept 2009 that shows the number of Estates notified for probate, the number taxed and the tax take in each year from 2002/03 through to 2006/07. Since then we have had 2007/08, 2008/09 and are now in 2009/10.

The number of estates subject to IHT rose from almost 27k in 2002/03 to over 34k by 2006/07. According to the Guardian however, "this year" (presumably 2009/10) it will only be 12,000. Can that be right? Well, it is possible I suppose as the transferable nil-rate band introduced by Alastair Darling in 2007/08 will have reduced the number of estates subject to IHT; indeed that was the purpose of the change. But a reduction of 65%? That would be quite astonishing.

The Guardian also focuses on the sharp reduction in the amount of IHT payable in recent years. This is easier to accept and will be a function of:
  • the transferable nil-rate band which reduced number of estates subject to IHT;
  • the impact of falling house prices and
  • the fall in value of stocks and shares generally during the recession.
Amongst the statistics on HMRC's document is a general note that makes for interesting reading too.

It states that the total number of deaths in 2006/07 was approx 570,000 and that estates on which IHT was paid that year represented just 6% of the total. Now, remember that this was before the introduction of a transferable nil rate band between husband and wife. As indicated above, this will dramatically reduce the number of estates liable to pay IHT from 2007/08 onwards. So the % of estates subject to IHT must also fall - probably to something closer to 4%.

It does make me wonder why why the press write so much about IHT when such a small proportion of their readers are ever likely to have to pay it.

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