UK citizens paid record high inheritance tax in the 2018/19 tax year, according to the latest official data.
Figures published by HM Revenue & Customs showed people in the UK paid £5.4 billion in inheritance tax over the 12 month period, up 3% on the previous tax year.
AJ Bell said the amount raised by the government has more than doubled since 2010, largely as a result of the government freezing the nil-rate band at £325,000.
The figures also revealed the number of estates liable for inheritance reached a record high of 28,100 in the 2016/17 tax year, up 15% in a year.
Tom Selby, senior analyst at AJ Bell, said it was “no surprise that HMRC continues to rake in record sums,” following its decision not to raise the nil-rate band in line with inflation.
He said: “The world of inheritance tax is painfully difficult to navigate and while the wealthiest should be able to afford suitable advice to take advantage of the various exemptions and reliefs available, those who can’t risk being caught out.
“As a minimum, the level of the nil-rate band should be looked at again and increased in line with inflation. Ideally a more fundamental Government overhaul of the IHT framework should also be undertaken, aimed at simplifying the structures for investors.”
According to Selby, savers can mitigate their tax liability by saving into a pension. Under changes introduced in 2015 alongside the pension freedoms, untouched defined contribution pensions can be passed on tax-free to beneficiaries if the individual dies before age 75, and taxed in the same way as income after age 75.
Selby added: “One area the Government should act on is a quirk in the rules which means most providers are required to exercise discretion over how pension death benefits are paid out in order to prevent an IHT charge being levied. This seems odd in a world where retirement control has been firmly put in the hands of the individual.
“The current approach can cause delay and administrative headaches at a painful time for beneficiaries, and it would be much simpler if pensions were removed from IHT altogether.”
