New: UK’s richest families got inheritance tax relief on £2bn of assets in 2022
Update: this post was updated on 27 September as the previous information supplied by HMRC wasn’t clear. The figures TJ-UK requested were for the total value of tax relief provided. HMRC have been in touch to clarify that the figures they shared were for the total value of the underlying agricultural and business property that received tax relief, and not for the amount of tax saved.
The government is giving some of the wealthiest families in the country inheritance tax breaks on billions of pounds of assets every year.
In 2022 just 275 families benefited from tax breaks on £2bn of agricultural and business assets handed on to the next generation.
Each family received a tax break on property worth at least £2.5m, potentially resulting in tax savings of approximately £700m pounds in total.
The scale of the problem is huge. Between 2017 and 2022, a total of £18.4bn of agricultural and business assets were handed on to the next generation either tax free or benefiting from low tax rates due to tax reliefs
The data is based on responses to Freedom of Information requests to HMRC.
Undermining the tax system
These reliefs contribute to a tax environment where the wealthiest families can largely avoid paying inheritance tax.
The bad design of inheritance tax loopholes also undermines public trust in the system.
Think tank Demos has shown that the rich using loopholes exacerbates public dislike of inheritance tax.
If we closed the loopholes
Closing down tax loopholes – which the wealthiest people and companies use to reduce the amount of tax they owe – could raise significant funds.
It would give the government billions to invest in the struggling services we all rely on like the NHS, schools and public infrastructure.
Meanwhile, the Chancellor would be able to keep the Labour party’s promise to keep taxes on ordinary working people flat.
How to close the loopholes
The government should place limits on the value of agricultural and business relief that can be claimed, as already happens in most other countries.
According to the Institute for Fiscal Studies, limiting both agricultural and property reliefs to £500,000 per estate would raise £1.4 billion in 2024-25, rising to £1.8 billion in 2029–30.
The government should also end the practice that shares listed on the alternative AIM market can be passed on free of inheritance tax.
“Under the guise of protecting small family farms and businesses, the country’s wealthiest families are able to use inheritance tax breaks to pass their fortunes onto the next generation”, Robert Palmer, Executive Director of Tax Justice UK, said.
“There is no justification for this, particularly when people are struggling to afford the basics and key services like the NHS are and councils are crying out for funding”, he added.
“The tax system needs urgent reform to ensure the super-rich and wealthiest companies pay their fare share and the economy gets the investment it needs.”
The press release for this research can be found here.