By Mark Fairlie.

A Freedom of Information (FOI) request to HM Revenue and Customs has revealed that the people of the prosperous commuter belt town of Guildford pay inheritance tax more than anywhere else in the country.

The FOI, requested by British insurer Direct Line, shows that as many as 658 families in the Surrey town were subject to the tax in 2015/16 alone; paying out an average of £231,000 each.

In contrast, only 31 estates in Wigan, Greater Manchester, were found to have been liable to pay inheritance tax in the same time period.

Inheritance Tax is the tax payable on an estate – including all property, money, and possessions – when someone dies. However, only those with an estate valued at £325,000 or higher are liable to pay the tax.

Inheritance tax statistics by area

While Guildford had the highest volume of families being made to pay inheritance tax on a relative’s estate, this still did not yield the largest inheritance tax liability in 2015/16. In fact, of the 658 estates charged in Guildford, only £152 million was paid in total.

South West London came a close second in numbers of estates, with 655 families charged the highly controversial tax around Chelsea and Wimbledon. However, the total inheritance tax paid in this area totalled a record-breaking £277 million; the largest inheritance tax yield in the country.

However, it was North West London that was found to have the greatest tax bills in the UK. Despite only 401 families paying inheritance tax, the total tax liability for the area was £153 million.

That equates to £390,000 per family on average which gives it the largest inheritance tax bill per estate in the UK. This figure has been attributed to the higher house prices in places such as Kensington and Hammersmith driving up the value of individual estates.

Inheritance tax bills by region

From the figures, the FOI showed that estates in the Greater London region pay the highest amount of inheritance tax on a regional basis in the UK; valued at over £1.1 billion.

This is closely followed by the South East of England, where estates collectively paid £805.5 million, then by the South West which contributed £404.6 million in inheritance tax.

Estates in Wales and Northern Ireland were found to pay the least in inheritance tax, valued at just £100.8 million and £27.2 million respectively.

Guildford crowned “inheritance tax capital” of the UK

Issues with inheritance tax

In 2017, an additional Transferable Main Residence Allowance (TMRA) was introduced to give those passing property on to their direct descendants, i.e. their children, greater tax relief.

However, critics have noted that the £325,000 allowance for inheritance tax liability has remained frozen since 2009, where house prices across the UK have increased.

This leaves many families that may not have been liable to pay inheritance tax in the past suddenly facing large tax bills when a relative passes away.

Business Manager at Direct Line Life Insurance, Jane Morgan, said that

“Brits pay billions of pounds in inheritance tax each year with large variations across the country, often due to differences in property values.”

Inheritance tax expected to reach record highs in 2019

Inheritance tax receipts are expected to hit a fresh record high in tax year 2018/19. In just the first six months of this tax year, families have been charged as much as £2.8 billion.

The Office of Budget Responsibility estimates that the total for 2018/19 will reach £5.4 billion; up £100 million on the previous tax year.

Chancellor Philip Hammond has since written to the Office of Tax Simplification to carry out a review of inheritance tax to ensure the system is fit for purpose. It is believed a report will be published on our before the Budget is released on Monday 29th October. 

Morgan added:

“If you are concerned about the amount of tax that may be payable on your estate when the time comes, you could seek independent advice and investigate transferring money to beneficiaries early as a gift, or placing assets into trust to reduce your liabilities.”