20 things

The facts about Inheritance Tax

26 August 2006

1. Research by Halifax revealed the government collected £3.3 billion in inheritance Tax (IHT) revenue for the financial year 2006/2007.

2. Over the past five years, Halifax has reported a 49 per cent increase in IHT revenue.

3. The lender showed IHT projects accounted for £3.6 billion in revenue for 2006 – 2007.

4. IHT revenue was a record £1.7bn in first half of 2006, up £200m from the first half of 2005 = representing an increase of 13 per cent from the first half of 2005 findings, Halifax revealed

5. The amount of IHT revenue collected in the first half of 2006 matches total IHT revenue collected over the full financial year 1997/98, the study showed.

6. The number of estates paying IHT rose by 72 per cent over the five years to 2003/04 to 30,451.

7. The government's own estimations about IHT suggested a further 22 per cent increase in the number of estates paying the tax by the end of 2006/07. This would bring the total number of estates eligible to pay the tax to 37,000.

8. Halifax revealed the 2006/07 IHT threshold of £285,000 would have reached the total of £430,000 if it had been increased in line with house price inflation over the past ten years.

9. According to the report, house prices have risen by 179 per cent over the past ten years. In contrast, there has only been an 85 per cent increase in the IHT threshold.

10. At present the inheritance tax threshold is projected to rise very gradually each financial year. This will culminate in the threshold reaching £325,000 by the financial year 2009/10.

11. Focusing on types of property and IHT thresholds, the average price of a detached property was above the inheritance tax threshold of £285,000 in London (£640,499) and the South East (£403,758), the Halifax IHT study showed.

12. The average price of a semi-detached property was also above the inheritance tax threshold of £285,000 in London (£362,485), along with the average price of a terraced house, which reached £335,456.

13. Bungalows also recorded average prices above the IHT thresholds, with average property prices at £304,659 within London far exceeding the tax thresholds set.

14. A total of 44 per cent of semi-detached house sales in Greater London were above the IHT threshold of £285,000 in 2005, the Halifax IHT study revealed.

15. The study also showed that 13 per cent of semi-detached transactions in the South East were above the IHT threshold.

16. Sales above the inheritance tax threshold accounted for 25 per cent of semi detached house transactions in four counties, Halifax stated.

17. Estates worth more than £2,000,000 accounted for 19 per cent of total IHT revenue in the financial year 2003/04, £526m, down from 23 per cent of total IHT revenue in 1998/99.

18. Estates valued between £500,000 and £1,000,000 generated the most IHT revenue in 2003/04, accounting for £921m. This equated to 31 per cent of the total amount generated from the tax.

19. Commenting on the findings, Tim Crawford, group economist at Halifax, said: “Inheritance tax revenue, along with the number of estates paying the tax, has risen sharply. This is largely due to the threshold for inheritance tax failing to keep pace with the rise in property prices over the past decade. We call on the government to raise the inheritance tax threshold to £430,000 to account for the increase in property prices over the past ten years,” he said.

20. The IHT threshold has risen by 85 per cent since 1995 from £154,000 to £285,000 in April 2006. There was a 30 per cent rise in April 1996 from £154,000 to £200,000. Over the period 1997 to 2004, the IHT threshold was increased broadly in line with retail price inflation. In 2005, the threshold was increased by 5 per cent to £275,000 with a further rise in April 2006 to £285,000. The government has scheduled further small increases in the threshold up to £325,000 by 2009/10.