Taxman's IHT income up 14% after threshold freeze

The inheritance tax (IHT) threshold freeze has boosted government revenues from the tax by 14%, an accountancy firm said.

The threshold over which IHT is due, frozen at £325,000, has already created a growth in tax receipts of 14% from 2009/10, UHY Hacker Young said.

In March 2011, Her Majesty's Revenue and Customs (HMRC) collected £2.7bn, up from £2.4bn in March 2010.

The accountancy firm said as property prices recover after the crash of 2008, more properties will exceed the threshold and push beneficiaries of estates into the tax.

HMRC figures show a drop in IHT income between 2007/08 and 2008/09, from £38bn to £28bn, as property prices plummeted.

Total IHT receipts fell again from £28bn in 2008/09 to £23bn in 2009/10, but in a sign the property market is recovering, last year IHT receipts began to rise again.

Mark Giddens, private client tax partner at UHY Hacker Young, said: "The kind of houses, particularly in the south of England, that are caught by IHT can be very modest."

In September 2009, the government created an interest rate of 3% on IHT paid in instalments, whereas previously there was no penalty for gradual repayment. Giddens said this has added to IHT income.