Government rakes in inheritance tax as ignorance reigns

This year the government raked in a total of £3.4 billion from IHT, the great bulk of which was from transfers of wealth following death.

Other sources of revenue include transfers to and charges on discretionary trusts.

Richard Watkins, financial planner at Close Brothers Asset Management, says: 'While a relatively small number of people contribute large sums in inheritance tax, the number affected will continue to grow in leaps and bounds if the current trend continues, unless the government brings inheritance tax in line with increases elsewhere in the British economy.

Close Brothers estimates that the number of people subject to IHT could double from 21,000 in 2012 to 42,000 in 2016/17.

'With inflation on the rise and the current housing boom boosting values even more, many will find their homes alone make them subject to the tax, especially with the current freeze on the threshold,' he adds.

Watkins adds that his company's own in-house research found that less than half of those liable for the tax knew the correct IHT threshold, which is £325,000.

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