UK Inheritance Tax Revenues Set to Surge as Rising Property Prices Push More Estates Over Threshold

The UK government is expected to raise more revenue from inheritance tax (IHT) as rising property prices and inflation push more estates beyond the tax-free threshold. The current inheritance tax rate is 40%, applied to estates valued over £325,000. This threshold, frozen since 2009, has caused middle-income families to become increasingly subject to the tax, especially in regions where property values have soared. Wealthier individuals, on the other hand, often use legal tax planning strategies to reduce their IHT burden, creating calls for reform from critics.

 

In the UK, the inheritance tax has been a point of contention, with concerns over its impact on households with significant property wealth but limited liquid assets. According to reports, the government has seen record IHT receipts in recent years due to the rising number of estates falling above the threshold. Additionally, the introduction of the Residence Nil-Rate Band (RNRB) in 2017 offered some relief by adding an extra allowance for family homes passed to direct descendants, but the overall revenue from IHT continues to rise.

 

Critics argue that inheritance tax disproportionately affects families with moderate wealth, as property appreciation pushes their estates above the tax-free threshold. Calls for reform have been raised, suggesting either increasing the threshold to account for inflation or overhauling the system entirely to address inequalities. The wealthy, who can afford estate planning services, often benefit from loopholes and exemptions that reduce their IHT liability, exacerbating the issue for middle-class families.

 

On the other hand, supporters of IHT believe it plays a crucial role in redistributing wealth and reducing inequality. By taxing large inheritances, the tax ensures that wealth accumulation across generations is checked, and the proceeds can be used to fund public services and welfare programs.

 

With inflation continuing to rise and property values showing no sign of a significant drop, the UK’s inheritance tax receipts are expected to grow, keeping the debate over its fairness and effectiveness alive. Calls for reform are likely to intensify as more families find themselves unexpectedly liable for this tax, sparking further discussion on the future of inheritance taxation in the UK

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