- London council paid £103m in inheritance tax in 2021/22
- But the West Sussex town had the most estates liable for the tax
The areas that pay the most inheritance tax have been revealed, with residents of one London borough paying a staggering £103m in 2022 alone.
Although only 92 estates in the Kensington constituency in west London paid inheritance tax in the 2021/22 tax year, they paid by far the most in the country, analysis of HMRC figures by law firm Kingsley Napley has found.
But while families in the affluent borough may have paid the most cash, a town in West Sussex had the highest number of estates on which inheritance tax was payable.
> How inheritance tax works – and what families need to know
Wealthy borough: Kensington residents paid £103m in inheritance tax in 2021/2022
When do you have to pay inheritance tax?
If you are single, your assets must be £325,000, or £650,000 if you are married or in a civil partnership. Only then will your survivors have to pay inheritance tax.
But there is an additional exemption that raises the threshold to a joint sum of £1 million if you have a partner, own a home and plan to leave money to your direct descendants.
Once an estate reaches £2 million, this Home Allowance is reduced by £1 for every £2 above this threshold, until it disappears completely at £2.3 million.
If you are worth more, your beneficiaries must transfer 40 percent of your assets above these amounts to the government.
Only the richest 4 percent of estates in the UK pay inheritance tax.
In which areas is the most inheritance tax paid?
After Kensington, residents of Hampstead and Kilburn in north-west London, in second place, paid £81 million for a total of 123 housing estates.
The tax-free threshold of £325,000 is subject to 40 per cent inheritance tax.
Residents of Kensington paid an average of £1.1 million in inheritance tax during that period, compared to just £658,537 for residents of Hampstead and Kilburn.
The neighbouring London constituencies of Hampstead and Kilburn, and Chelsea and Fulham also topped the list.
Interestingly, Wimbledon, East Surrey, Lewes and the Cotswolds all dropped off the list of highest paying cities last year. South West Hertfordshire, South West Surrey, Chichester and Windsor all feature.
Areas where most estates pay inheritance tax
Although Chichester is only the ninth highest tax constituency, paying £47 million, it has the highest number of estates subject to tax, with a total of 153 estates hit by the tax authorities.
Esher and Walton had the second highest number of taxable estates, at 150, with residents paying a total of £45 million.
Southern focus: all areas with the highest wages are in the south-east of England
The ten areas with the highest tax burden, both by volume and value, are all in the south of the country, with the most northerly point being Hertfordshire.
Sophie Voelcker, partner in the private client practice department at Kingsley Napley, said: ‘Our latest rankings show that house prices and a region’s socio-economic demographics drive up local inheritance tax costs, so it’s no surprise that the South East takes the medals.
‘We are advising a growing number of clients who wish to reduce their estate for inheritance tax purposes and take advantage of available exemptions before 30 October: namely the use of the inheritance tax-free band, annual exemption, regular gifts from surplus income, gifts of business or agricultural property or potentially exempt transfers. Otherwise they are advised to simply spend.’