The latest IHT statistics, released by HMRC at the end of July 2018, reported that IHT receipts totalled £5.2bn in 2017/18 – an increase of 8% (£388m) compared to 2016-17. This number has been increasing since 2010/11, so is confirmation of the trend, rather than any great surprise. More interestingly, the statistics confirm property values as a massive driver of growing IHT receipts; 54% of the increase in net capital value of estates since 2009/10, which more than quadrupled from £17bn to £79bn, is derived from residential property.
Additionally, these jumps in estate values are not just concentrated in the hands of a super-rich few, pushing up the amount of IHT collected by the government. In fact, more and more people are finding themselves within IHT’s reach; the total number of liable estates has increased every year since 2009-10. In 2015-16 there were 24,500 liable estates, an increase of 1,300 since 2014-15.
While spousal transfers and transfers to charity are the most used IHT reliefs, HMRC’s commentary accompanying the figures is a testament to the value of Business Relief (referenced by HMRC as Business Property Relief) as a tax efficient method of passing funds to the next generation:
“the composition of assets changes between the various net estate bands. Where net estate value is less than £2m, estates are likely to consist mainly of residential property and cash. Above this limit, estates are more likely to consist of securities and other assets, which attract reliefs like Agricultural Property Relief (APR) and Business Property Relief (BPR). This has a tendency to lower the average tax rates.”
The suggestion that higher value estates are making better use of Business Relief points to a large subset of smaller estates that could be well-served by Business Relief advice.
The good news is that there is an option for advisers looking to resolve this issue for their clients; Oxford Capital’s Estate Planning Service provides both real returns and the flexibility and control of allowing investors to switch* between growth, income and access options as circumstances change. (*Fees apply)
For more information on Oxford Capital’s Estate Planning Service, click here.