Londoners pay highest average inheritance tax bill in UK at over £270k

Londoners pay on average the highest inheritance tax bill in the UK, according to latest official government figures.

Data from HMRC shows residents in the capital paid an average of £271,820 in inheritance tax on their estates in 2018/19 upon death.

Meanwhile, UK residents paid an average of £209,502 in inheritance tax in the same year.

The north west registered the lowest average inheritance tax bill in the UK, with residents in the area being liable for £152,898 on average.

Latest figures from HMRC show a total of £5.69bn in inheritance tax was paid in 2020/21 .

Sean McCann, chartered financial planner at NFU Mutual, said: “Inheritance tax is feared by many but paid by relatively few. But with the average bill in excess of £200,000, it can make a significant dent in a family’s wealth for those that do get caught in the net.”

McCann warned that more households will be caught by the IHT net in the future after chancellor Rishi Sunak froze the threshold when inheritance tax applies at £325,000 and the residence nil rate band to offset the cost of responding to the Covid crisis.

3.7 per cent of deaths triggered an inhertiance tax bill in 2018/19, but this percentage is expected to rise following the decision to freeze the tax-free allowances for the next five years, NFU Mutual said.

“With the tax-free allowances frozen for the next five years, rising asset prices and a heated housing market, a growing number of families will be impacted,” McCann added.

“It’s critical that families concerned about being caught by inheritance tax seek advice as early as possible. The earlier you plan the more options you have to mitigate any potential bill.”