The RNRB, combined with the traditional nil rate band, allows married couples to pass on a family home worth up to £850,000 tax-free.
Under the government’s current plans, the RNRB will be increased each year until 2020, when a married couple will be able to bequest a home worth £1m tax free.
The latest rise extends the steadily rising trend for return for the government from this tax, with HM Revenue and Customs data showing that inheritance tax receipts have increased by 100% in just seven years.
In a Financial Times article, HMRC said it expected inheritance tax receipts to fall as the RNRB allowance increases.
“The allowance was only available from April 2017, much of the tax received dates from before the new relief took effect,” HMRC told the Financial Times.
Order to chaos
Despite HMRC expecting inheritance tax receipts to drop, many experts say people are not taking advantage of the allowances as they are extremely complex.
In January the UK Treasury acknowledge that inheritance tax is “particularly complex” and requested that the Office of Tax Simplification (OTS) carry out a review.
George Bull, senior tax partner at RSM UK, said the review provides a “crucial” opportunity to simplify inheritance tax.
One recommendation RSM would make to the OTS would be for a single threshold to be introduced that replaced the multiple thresholds and nil rate-bands.
Bull also suggested that that agricultural property relief and business property reliefs should be reviewed.
“They were originally enacted to prevent the break-up of family farms and the sale of family companies which would otherwise be necessary if tax had to be paid on the death of the founder.
“Without a doubt, there is a continuing need for these reliefs but somewhere along the way they have lost their original focus. Now is the time to review that,” Bull said.