Inheritance tax bills rise over £100,000 among the Tories

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Average estate tax assessments are on track to nearly double under conservative leadership, new analysis shows.

When the Conservatives came to power in 2010, the average amount a family paid in IHT was £165,875.

This has already grown by almost £50,000 to £215,652 in 2019-20, the last year for which HMRC has data on charged deaths.

But tax firm RSM predicts the average tax bill will rise to £283,000 in 2027-28 if Chancellor Jeremy Hunt decides to keep the IHT thresholds frozen in his fall statement on Thursday. It means that families will pay £8.9 billion in tax on the estate of their loved ones in 2027-28 alone.

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It also means that families will pay 70 percent more in IHT than in the year David Cameron was elected. The massive increase is due to rising house prices, rising inflation and Prime Minister Rishi Sunak’s decision as Chancellor not to raise IHT thresholds to keep up with rising prices.

The zero rate bracket and the zero rate residential bracket – above which the 40 percent tax is paid – at £325,000 and £175,000 respectively until 2025-26. Mr Hunt is expected to extend the freeze for another two years.

The stealth movement has already drawn a growing number of families to the IHT grid and raked in billions more in taxes for the government.

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The latest prediction from the Office for Budget Responsibility is that IHT revenues will soar to a record £6.7bn this tax year.

Tax firm RSM estimates that the average IHT bill will reach £259,000 this year, an increase of nearly £100,000 from 2010 levels. In 2010-11, 15,584 families paid £2.59 billion in IHT, which is less than the half of what taxpayers are expected to pay collectively this year.

Shaun Moore of asset manager Quilter said IHT bills were getting bigger because of tax impediments, where inflation and wage growth are pulling taxpayers into higher tax brackets.

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He said: “IHT was once thought of as a tax only levied on the very wealthy, but frozen thresholds and an unbridled real estate market are getting more people caught up in the tax and the average bill is rising.

“Now many people who wouldn’t consider themselves wealthy, especially those in the Southeast, will face a hefty IHT bill. This is well reflected in the fact that London and the South East have the most estates paying IHT, which is due to the region’s above-average house prices.