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Estates liable for Inheritance Tax in the UK in 2010-2011 faced a bill of nearly £166,000 on average, according to new analysis of HMRC data by Prudential. The study, based on the latest publicly available regional data on tax receipts, shows that in the 2010-2011 tax year, inheritance tax was paid on around 15,600 estates with a total bill of £2.6 billion. Here in the North West of England we have a diverse area, with massive variations in the value of property, one of the major factors in people’s inheritance tax (IHT) liabilities.  In the area around our office, we have the hotspots of Altrincham, Hale, Bowdon and Wilmslow to name a few and the high property values here create particular problems for our clients as property can be difficult to handle when planning to save IHT.

London and the South East of England have been identified as the UK’s inheritance tax hotspots by the Prudential analysis. The two regions accounted for as much inheritance tax revenue as the rest of the UK put together. The £1.3 billion in receipts from London and the South East represented half of all the inheritance tax paid nationally, even though only 42 per cent of liable estates (a total of around 6,500) were in the two regions.

Unsurprisingly, given that property values in the capital and the South East of England tend to be higher than elsewhere, the average amount paid in inheritance tax in those areas was considerably more than in other parts of the country. Whereas the average estate liable for inheritance tax in Wales faced a bill of £126,000, and in the North East of England £130,000, the figure for the South East of England was £174,000 and in London, a whopping £234,000.

In both Northern Ireland and the North East of England only 200 estates were liable for inheritance tax, yet many individual counties in the South East of England saw far more estates above the threshold – including Surrey (810), West Sussex (530) and Hampshire (500). HMRC reviewed nearly 260,000 estates in the 2010-2011 tax year, meaning inheritance tax was paid by only 6 per cent of estates, a figure similar to the two previous years. This is much lower than years between 2005 and 2008, when more than 10 per cent of estates were liable for inheritance tax.

Graeme Robb, a tax specialist at Prudential, said:

“These figures reveal that a huge amount of inheritance tax is paid by a relatively small number of people. Nevertheless, it is likely that an average bill of more than £160,000 would be unwelcome for any family.”

Many individuals can legitimately save inheritance tax through careful tax planning. Inheritance tax planning through a professional adviser can be instrumental in ensuring that people can leave more of their wealth to those who they wish to benefit from their legacy.

IHT may still be considered a voluntary tax, although perhaps less so than in the past.  There remain tried and trusted ways in which to reduce or remove any liability from your estate.  We explore many of these in our Guide to Wealth Preservation.

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