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Inheritance tax projected to double by 2030

  • IHT receipts are set to reach £10 billion per year by 2030, almost double the amount received today (£5.1 billion)
  • Increase in IHT receipts due to asset values increasing while the nil rate band remains frozen
  • Many set to pay unnecessary IHT, with 18% of estates worth up to £1 million without an estate plan

Inheritance tax receipts are projected to reach £10 billion per year by 2030, almost double the amount received by the UK government today, new figures from Canada Life reveal1.

The analysis reveals the increase in revenues from inheritance tax (IHT). It has taken 30 years to reach the current revenue level of around £5.1 billion per year, but it is now expected to take only another 10 years to reach £10 billion.

The increases come as the nil rate band, one of the most important means of protecting an estate from IHT, reaches its tenth anniversary of being frozen at £325,000. As asset values increase, but the nil rate band remains static, more people are caught in the inheritance tax trap and in real terms are able to protect far less of their estate from inheritance tax than before.

According to Canada Life’s research, many estates are also likely to end up paying more inheritance tax than is necessary, with approximately 18%2 of estates worth up to £1 million failing to put in place an inheritance tax plan.

Neil Jones, Market Development Manager at Canada Life, said:

“There’s plenty that can be done within the existing rules to reduce an IHT bill. Perhaps because of a very British reluctance to discuss death, many people - and sometimes their financial advisers - won’t bring up estate planning. As a consequence the Government is undoubtedly receiving tax that with proper planning wouldn’t need to be paid.

“There are a wealth of solutions out there, like discounted gift trusts, which can reduce IHT while still enabling fixed, regular payments for people who are scared of ‘giving it away too soon’. We’d urge people to consider meeting with a financial adviser. For a relatively small outlay, the rewards for future generations can be enormous.”

1. Figures based on current revenue trends and continuation of current regulatory environment.

2. Figures taken from Canada Life’s IHT Monitor.

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Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority.

Canada Life International Assurance (Ireland) DAC is authorised and regulated by the Central Bank of Ireland.

Stonehaven UK Limited and MGM Advantage Life Limited, trading as Canada Life, are subsidiaries of The Canada Life Group (U.K.) Limited. Stonehaven UK Ltd is authorised and regulated by the Financial Conduct Authority. MGM Advantage Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority.