London and the South East pay half of the country’s £3bn inheritance tax bill, new research from Prudential reveals today.
The latest publicly available data on tax receipts show that inheritance tax – informally referred to as a death tax – was paid on 17,900 estates across the whole of the UK in the year ending March 2013.
The £3bn bill is a 15 per cent increase on the previous financial year. By itself, the capital paid £750m – one quarter of the total revenue from the tax. Of all estates that are valued above the £325,000 inheritance tax threshold, 42 per cent were from London and the South East.
The average inheritance tax bill was also higher in London than anywhere else in the country, with the average amount paid per liable estate totalling almost £236,000 – 38 per cent higher than the national average.
Under new rules announced by Chancellor George Osborne this summer, from April 2017 married couples and civil partnerships will be able to pass on £1m tax free. The Office for Budget Responsibility estimates that the changes will cost the Treasury just shy of £1bn by 2020.
Under the pension freedoms that came into force in April 2015 individuals now have the freedom to pass on their unused defined contribution pension to any person of their choosing when they die without paying the 55 per cent tax charge previously applied to pensions passed on at death.