- London borough paid £103million in inheritance tax in 2021/22
- But West Sussex city had most estates liable for the tax
The areas which pay the most inheritance tax have been revealed, with residents of one London district paying out an eye-watering £103million in 2022 alone.
Despite only 92 estates in the West London constituency of Kensington paying inheritance tax during the 2021/2022 financial year, they paid by far the most in the country, according to analysis of HMRC figures by law firm Kingsley Napley.
But while families in the affluent borough may have paid the most in cash terms, a city in West Sussex had the highest number of estates that were liable for inheritance tax.
> How inheritance tax works – and what families must know
Wealthy area: Kensington residents paid £103million in inheritance tax charges in 2021/2022
When do you need to pay inheritance tax?
You need to be worth £325,000 if you are single, or £650,000 jointly if you are married or in a civil partnership, for your loved ones to have to pay inheritance tax.
But there is a further allowance which increases the threshold to a joint £1million if you have a partner, own a property, and intend to leave money to your direct descendants.
Once an estate reaches £2million this own home allowance starts being removed by £1 for every £2 above this threshold. It vanishes completely by £2.3million
If you are worth more than this, your beneficiaries will have to hand over 40 per cent of your assets above those levels to the Government.
Only the richest 4 per cent of estates in the UK pay inheritance tax.
Which areas pay most inheritance tax?
After Kensington, second-place Hampstead and Kilburn in North West London saw residents pay £81million across a total of 123 estates.
Inheritance tax is charged at 40 per cent over the tax-free threshold of £325,000.
Kensington residents paid an average of £1.1million each in inheritance tax during the period, compared with just £658,537 for those in Hampstead and Kilburn.
Also topping the list were the neighbouring London constituencies of Hampstead and Kilburn, and Chelsea and Fulham.
Notably, Wimbledon, East Surrey, Lewes and the Cotswolds all dropped from the list of highest payers last year, with South West Hertfordshire, South West Surrey, Chichester and Windsor all making an appearance.
Areas with most estates paying inheritance tax
Despite only being the ninth most-taxed constituency, paying £47 million, Chichester had the highest number of taxed estates, with 153 feeling the sting of the taxman.
Esher and Walton had the second highest number of taxed estates, at 150, with residents paying a total of £45million.
Southern focus: All of the highest paying areas are located in the South East of England
The top ten taxed areas in both volume and value are all located in the south of the country, with the furthest north in Hertfordshire.
Sophie Voelcker, partner in the private client practice at Kingsley Napley, said: ‘Our latest ranking shows that house prices and the socio-economic demographics of a region are driving up the local inheritance tax costs, so it is perhaps no surprise to see the South East take the medals.
‘We are advising an increasing number of clients who are looking at reducing their estates for inheritance tax purposes and making use of available exemptions pre-30 October: namely use of the inheritance tax nil rate band, annual exemption, regular gifts out of excess income, gifts of business or agricultural property or potentially exempt transfers. Otherwise they are advised to just spend.’
