Inheritance tax payments rise

The number of estates paying inheritance tax rose by 72% over the five years to 2003/04, a study has shown.

Some 30,451 estates in the UK were liable to pay tax with a further 22% rise to 37,000 expected by 2006/07, according to the Halifax.

The majority of these estates are worth less than £500,000 after the threshold for inheritance tax - currently set at £285,000 - failed to keep up with a housing market which has grown by 179% over the past decade.

In contrast, inheritance tax has risen by 85% since 1996.

Halifax says the threshold for inheritance tax would stand at £430,000 if it had been increased in line with house price inflation.

Assets worth less than £500,000 now account for 71% of those which face paying tax, a 75% increase over the past five years to stand at 21,750 in 2003/04.

Each of these paid an average of £31,393 in tax, contributing 25% of the total inheritance revenue of £3.3 billion.

Moving up the scale, assets worth between £500,000 and £1 million generated 33% - or £921 million - of the total revenue. In contrast, estates worth more than £2 million made up 19% - £526 million - of revenue.

Tim Crawford, group economist at Halifax, said: "The steep increase in the number of estates paying inheritance tax highlights that the current inheritance tax threshold of £285,000 is too low. Significantly, families with lower valued estates are paying an increased share of the total inheritance tax take whilst the super-rich are paying a smaller share."

In 2006/07, inheritance tax is expected to pull in revenue of £3.6 billion. The Government intends to further increase the threshold to £325,000 by 2009/10.