Details of which part of the UK have seen the biggest raid on the estates of those keen to pass on an inheritance have been revealed. Families living in the London and the home counties are most likely to be hit with an inheritance tax (IHT) bill.
At the same time, the largest sums are likely to come from wealth hot spots in the capital and are largely driven by supersize property price rises. The Government is expected to rake in £7.5 billion from Britain’s ‘most hated tax’ this year – up 25 percent in just three years.
And the Chancellor Rachel Reeves is under pressure to find new ways to boost government income from IHT even further in her Budget this October.
As a result, wealthy Britons are rushing to lawyers and accountants to see if there are ways of passing on their wealth before any changes come into effect.
The breakdown comes from law firm Kingsley Napley which looked at HMRC figures data for 2021-22, which is the most recent year for official inheritance tax data.
It found that Chichester parliamentary constituency topped the IHT league for the number of estates which paid a charge at 153 with some £47m handed to the taxman.
In second was the Surrey area of Esher and Walton with 150 estates paying £45m. Third spot went to Finchley and Golders Green in North London, where 148 estates paid £59m.
Fourth place went to the leafy Richmond Park in South West London with 145 estates paying £55m and in fifth was South West Surrey with 140 estates paying £49m.
Looking at parliamentary constituencies where the death tax saw the largest amount handed to the taxman, London featured at the top of the list.
Residents in Kensington, home to old money as well as city bankers and captains of industry, paid a total of £103m, with £81m coming from residents of Hampstead and Kilburn; £76m from Chelsea & Fulham; and South West Hertfordshire on £61m.
Sophie Voelcker, Partner in the Private Client Practice at Kingsley Napley LLP, said: “Our latest ranking shows that house prices and the socio-economic demographics of a region are driving up the local IHT costs, so it is perhaps no surprise to see the South East take the medals.”
She added: “We are advising an increasing number of clients who are looking at reducing their estates for IHT purposes and making use of available IHT exemptions pre 30 October: namely use of the IHT nil rate band, annual exemption, regular gifts out of excess income, gifts of business or agricultural property or potentially exempt transfers. Otherwise they are advised to just spend!”
IHT is levied on estates worth more than £325,000 – although people may benefit from a bigger allowance if they leave everything to a spouse or civil partner, or the family home to a direct descendant. Everyone has a £325,000 tax-free threshold, known as the nil-rate band.
This is the easiest way to pass your assets onto your loved ones and reduce – or eliminate – your IHT liability is to give them away, however there are some things to consider.
Anyone can give up to £3,000 of their assets to loved ones each tax year without that sum becoming liable for IHT, no matter when they die. It is possible to roll two years together and pass on £6,000.
Gifts of £5,000 to children made in advance of a wedding are also protected from IHT; the figure drops to £2,500 for grandchildren.
Other gifts can also be make, but if you die within seven years of making the gift, IHT will be payable on a sliding scale. For example, if you die three to four years after giving the money, the IHT rate lowers to 32 per cent. At six to seven years it falls to 8 per cent.
The main purpose of a pension is to provide you with income in retirement. But you can also nominate beneficiaries should you pass away before you receive it. The nominations have to be submitted directly to your pension provider. IHT isn’t normally payable on personal pensions.
Tax Receipts By Volume 2021/22 (source HMRC)
Parliamentary Constituency Number Amount (£ million)
Chichester 153 47
Esher and Walton
Finchley and Golders Green 148 59
Richmond Park
South West Surrey
Chesham and Amersham 131 35
Ruislip, Northwood and Pinner 127 28
Hampstead and Kilburn 123 81
Chipping Barnet
Hornsey and Wood Green 121 33
