Inheritance tax set to hit more people, as UK millionaire numbers surge
The number of millionaires in the UK could rise to almost half a million this year, according to financial services company NFU Mutual.
Based on the company's analysis of HM Revenue & Customs' (HMRC) UK Personal Wealth Statistics, NFU Mutual found that the number of millionaires in the UK rose by 27 per cent between 2008 to 2013, standing at just over 409,000 at the end of the period.
Based on this rate of increase, NFU Mutual predicts that the number of millionaires in the UK could reach 495,000 this year and rise to 585,000 by 2020.
IHT PLANNING TO BECOME MORE IMPORTANT
This trend would equate to a significant increase in the number of people who are liable to pay inheritance tax (IHT), especially as the nil rate band is set to remain frozen at £325,000 until 2021. This suggests that IHT planning will become even more important to growing number of people.
'More millionaires means more inheritance tax for the Treasury. These figures show that the taxman is set to take an ever greater slice of people's estates over the next few years as house prices and share prices have boosted the wealth of the nation,' explains Sean McCann, a chartered financial planner at NFU Mutual.
As the £325,000 tax-free allowance has been frozen since 2009 and is set to stay the same until 2021, McCann suggests that taxpayers utilise the new tax-free allowance that can be used to save IHT on the family home, which is being introduced from April 2017. This will rise from £100,000 to £175,000 in 2020.
'By that time it will be possible for a married couple to leave up to £1 million free of IHT,' McCann adds.
Based on a study of 'identified wealth', which is extrapolated from the estates that are passed on death each year and require a grant of representation, HMRC noted that the average person with an estate that amounted to £1 million between 2011 and 2013 had a little over 20 per cent in securities.
Around 40 per cent was in UK residential property, while cash accounted for just over 15 per cent of assets.
The total income from investments amongst the taxpaying population increased by 39 per cent between 2010 and 2014, HMRC noted.
NFU Mutual suggests the significant increase in the number of millionaires between 2010 and 2013 can be attributed to a rise in property prices and share prices. For example, the Land Registry's house price index for London increased by 23.4 per cent over the three years from December 2013.
Meanwhile, the FTSE 100 rose by 27.5 per cent between January 2011 and 31 December 2013.