The Office for Budget Responsibility (OBR) has revised its Inheritance Tax (IHT) forecasts in a new report published alongside the Autumn Budget last week.
According to the OBR’s new figures, British families are now expected to pay £5.3 billion in IHT during the 2017/18 financial year – up from previous estimates of £5 billion.
Meanwhile, between 2016 and 2022, the OBR now estimates that Britons will pay approximately £900 million more in IHT than was previously forecast in March.
In its report, the OBR said: “Population projections have boosted receipts, reflecting higher expected mortality rates.”
However, experts argue that numerous other factors have affected the OBR’s revised forecasts.
For example, concerns have been raised that rapidly-rising property prices are pushing more and more middle class families above the UK’s £325,000 IHT threshold or ‘nil rate band’ – above which IHT is incurred at a rate of 40 per cent of an estate’s total value.
Following the Budget’s surprise announcements on Stamp Duty Land Tax (SDLT) last week, it is now estimated that property prices will climb even higher over the next year – pushing even more families above the nil rate band.
Fortunately, new legislation introduced earlier this year enables homeowners to take advantage of an additional IHT allowance, if they intend to pass the residential property on to direct lineal descendants in their Wills.
Known as the residence nil rate band (RNRB), the new rules enable those who seek appropriate legal advice to pass on an additional £100,000 in property value completely free of IHT – as long as the property is passed on to a qualifying beneficiary such as a child or grandchild.