Inheritance tax rises, but due on only 3.6% of estates

This is a copy of a post which I wrote for The Law Wizard blog,
dated 28 May 2014.

Eager to feed our (and our readers’) inner statistician, we asked HM Revenue & Customs how many IHT205 and IHT400 forms they received over a three year period, and how many estates were subject to inheritance tax. Figures reveal an increase in taxable estates, though IHT is due after only 3.6% of deaths.

According to the figures received by The Law Wizard:

In 2011 HMRC received 215,900 IHT205s and 46,700 IHT400s. IHT was due on 17,000 estates.
In 2012 HMRC received 215,700 IHT205s and 35,300 IHT400s. IHT was due on 18,000 estates.
In 2013 HMRC received 230,000 IHT205s and 45,500 IHT400s. IHT was due on 18,500 estates.

(We asked for data for calendar, rather than financial, years.)

The steady rise in number of estates subject to inheritance tax correlates with an upturn in the UK economy. It also corresponds with an increase in deaths in England and Wales (499,331 in 2012, 484,367 in 2011).

In 2012 (the latest year for which a figure for number of deaths in England and Wales was available), inheritance tax was due after 3.6% of deaths. In 2011 the figure was 3.51%. These percentages are similar to the figures for the last ten years or so, though the relatively small number may come as a surprise to those who believed IHT applied to more estates.

It seems that public perception of inheritance tax, not to mention media attention, is out of kilter with the relatively small number of estates which are hit by the levy.

However, with the nil-rate band frozen since 6 April 2009, the country emerging from a recession and house prices on the rise, it is unsurprising to see more estates subject to the tax, and I would expect to see the figure continue to rise.

It is also unsurprising to see exempt estates outnumbering non-exempt estates by some distance. Around 20% of submissions were on form IHT400; the rest used form IHT205.

I was, incidentally, surprised to receive such peculiarly round figures from HMRC, particularly the figures for number of estates on which IHT is due. We have asked for justification / explanation.