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Is IHT reform now on the cards?

17 October 2022

Kingsley Napley’s ‘Inheritance Tax Premier League’ (ITPL) analysis shows ranking of where people pay the most inheritance tax by local authority.


With Liz Truss’ home borough of Greenwich barely making the top 100* of local authorities’ contributions to Government coffers for inheritance tax, IHT may not be high on her neighbours’ agendas but according to James Ward, Head of Private Client at Kingsley Napley LLP, residents in other boroughs would be foolish to wish for the abolition of IHT any time soon.

During her leadership bid in the summer, Liz Truss promised a review of inheritance tax if she became Prime Minister. One of the major donors to Liz Truss’ campaign, Treasury Minister Andrew Spencer, even called for the complete scrapping of the tax earlier this month. However, given property prices are falling and new Chancellor Jeremy Hunt has warned some taxes may need to go up, there is now a chance IHT reform may be in his sights to achieve the same tax take or increase it in future.

Currently the inheritance tax threshold is £325,000, meaning people inheriting estates over this amount are required to pay tax at 40%. For the financial year 2021-22 IHT receipts totalled £6.1bn.  

Decades of house price growth across the UK have taken more and more estates into the threshold for IHT, with London and the South East paying 47% of IHT receipts according to the latest available figures*. But any proposal to eliminate IHT at this point in the economic cycle would surely be as unpopular and unwise as the 45p income tax fiasco,” 

James Ward says.

Whether the new Chancellor decides to tamper with the current regime or not, those whose estates will be liable for IHT should double down on their planning,”

James adds.

An analysis* by Kingsley Napley of the latest available HMRC statistics (for tax year 2019-20 - see source), shows a breakdown of inheritance tax (IHT) receipts by area. Highlights include:

  • Kensington and Chelsea tops the league for average value of IHT paid once again (see table 1 below) and Barnet once more leads by volume of estates hit by IHT (see table 2);
  • 8 of the 10 highest paying localities for IHT are in London and the South East with Newcastle and Suffolk being the only exceptions (table 1);
  • The average IHT bill in Runnymede was double that of Aberdeenshire; the average in Merton double that of Cardiff and the Hounslow average was double that of Derby (See Kingsley Napley Inheritance Tax Premier League Analysis).
  • The total IHT take for the tax year 2019-20 was £5.2bn. For the financial year 2021-22 the total was £6.1bn.

James Ward comments further:

At least with IHT it’s a case of better the devil you know. Many of the clients I speak to take the view that abolishing it entirely would only enhance the prospect of a wealth tax under an incoming Labour Government. IHT remains a tax where planning is possible to mitigate liabilities due.”

Kingsley Napley sees a steady stream of enquiries from those who want to take legitimate steps to reduce their inheritance tax liabilities. Such steps might include:

  • Capital gifting: Sizeable transfers seven years before death;
  • Income gifting: Regular contributions to grandchildren’s school fees or an offspring’s mortgage for example;
  • Exemptions: Using all nil rate bands. Business relief in particular can lead to big savings;
  • Life insurance: Arranging for this to be paid out to family members (so letting the insurance pay the tax);
  • Skiing: Spending the Kids Inheritance.  

James Ward adds:

Those living in IHT hotspots should strongly consider all of these steps and more to avoid ranking at the top of our Inheritance Tax Premier League in future. It is always wise to have a regular review of estates and inheritance plans to ensure tax-efficiency in the event of death but especially now given the current political and economic environment.”

*The Kingsley Napley Inheritance Tax Premier League analysis is as follows:

1. Rank by Value of IHT Estates – 2019/20 tax year (with 2018/19 table for comparison)

2019/20 Area Number Amount £m Average £k
1 Kensington and Chelsea  142 155 1,092
2 Westminster  141 97 688
3 Camden  163 98 601
4 Islington  88 35 398
5 Hammersmith & Fulham 120 47 392
6 Chichester 141 49 348
7 Barnet 302 104 344
8 Basingstoke & Dean 72 23 319
9 Newcastle upon Tyne  54 17 315
10 Suffolk Coastal 83 26 313
11 Three Rivers 79 24 304
12 South Oxfordshire 121 35 289
13 Wandsworth 180 51 283
14 Babergh  53 15 283
15 Oxford 86 24 279
16 Windsor & Maidenhead  151 42 278
17 Cotswold 69 19 275
18 Epsom & Ewell 62 17 274
19 Haringey  133 36 271
20 Elmbridge 174 46 264
         
2018/19 Rank Area Number Amount £m Average £k
1 Kensington and Chelsea  144 154 1,069.40
2 Westminster  159 130 817.6
3 Camden  145 64 441.4
4 Stratford-on-Avon  79 34 430.4
5 South Oxfordshire 106 39 367.9
6 Babergh 44 16 363.6
7 Winchester 104 37 355.8
8 West Devon 35 12 342.9
9 Hammersmith and Fulham  104 35 336.5
10 Test Valley 52 17 326.9
11 Hertsmere 100 32 320
12 Waverley 139 44 316.5
13 Chichester 109 33 302.8
14 Kingston upon Thames  159 47 295.6
15 West Dorset 95 28 294.7
16 Barnet  316 92 291.1
17 Wandsworth  176 51 289.8
18 South Bucks 107 31 289.7
19 Islington  80 23 287.5
20 Merton  150 41 273.3

 

2. Rank by Number of IHT Estates – 2019/20 tax year (with 2018/19 table for comparison)

2019/20 Rank Area Number Amount £m Average £k
1 Barnet  302 104 344
2 Bromley  271 52 192
3 City of Edinburgh 228 44 193
4 Wiltshire 210 46 219
5 Cornwall 193 27 140
6 Croydon 183 26 142
7 Wandsworth  180 51 283
8 Cheshire East  179 31 173
9 Brighton & Hove 176 32 182
10 Elmbridge  174 46 264
11 Ealing 173 37 214
12 Camden  163 98 601
13 Leeds  156 26 167
14 Birmingham 156 23 147
15 Hillingdon 152 22 145
16 Windsor & Maidenhead  151 42 278
17 Redbridge 150 24 160
18 Harrow 146 32 219
19 Waverley 143 35 245
20 Kensington and Chelsea  142 155 1092
         
2018/19 Rank Area Number Amount £m Average £k
1 Barnet  316 92 291.1
2 Wiltshire 261 60 229.9
3 City of Edinburgh 254 54 212.6
4 Bromley  249 52 208.8
5 Cornwall 245 49 200
6 Elmbridge 197 49 248.7
7 Richmond upon Thames  191 47 246.1
8 Wandsworth  176 51 289.8
9 Ealing  173 32 185
10 Croydon  169 29 171.6
11 Cheshire East 165 30 181.8
12 Westminster  159 130 817.6
13 Kingston upon Thames  159 47 295.6
14 Bristol, City of 159 25 157.2
15 Enfield  159 24 150.9
16 Merton  150 41 273.3
17 Brighton and Hove 149 27 181.2
18 Birmingham  148 31 209.5
19 Camden  145 64 441.4
20 Kensington and Chelsea  144 154 1,069.40

NOTES TO EDITORS

The Kingsley Napley Inheritance Tax Premier League is based on HMRC data published on 28 July 2022 (Source: https://www.gov.uk/government/statistics/inheritance-tax-statistics-commentary/inheritance-tax-statistics-commentary) and relates to inheritance tax bills settled in 2019/20. We have included comparable figures for the prior tax year. 2017/18 data can also be viewed here https://www.kingsleynapley.co.uk/insights/news/kingsley-napley-unveils-the-inheritance-tax-premier-league-itpl. The numbers of estates liable to tax passing on death are estimates and the numbers given are by Local Administrative Units (LAU) Level 1.

Note: The Borough of Greenwich ranked 93rd in the list of local authority areas recording the highest value of IHT receipts for the 2019/2020 tax year. See Kingsley Napley Inheritance Tax Premier League Analysis

 

About Kingsley Napley

Kingsley Napley LLP was Law Firm of the Year (Independents) in The Lawyer’s latest awards and is a leading UK based law firm providing expertise for our clients’ business and private lives, when it matters most. We advise in the following areas: corporate and commercial, criminal, dispute resolution, employment, family & divorce, immigration, medical negligence & personal injury, private client, public law, real estate & construction, and regulatory law.

 

James Ward

Partner and Head of Department

+44 (0)20 3535 1653

jward@kingsleynapley.co.uk

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