The Government continues to collect a record amount from inheritance tax, according to the latest data released from HM Revenue & Customs.
These figures show the Government raked in £6.8bn from IHT between April 2023 and February 2024, a £0.4bn increase on tax receipts over the same period the year before.
With just one more month left of the financial year, this puts IHT revenue at just £0.3bn less than the record amount it collected in the 2022/23 tax year.
These higher tax receipts are due to the fact that IHT thresholds have been frozen, and are not due to be reviewed until April 2028. At the same time there has been significant property price inflation, although the housing market has cooled over the past 18 months. The main IHT threshold has stood at £325,000 since 2009.
Quilter tax and financial planning expert Rachael Griffin says: “Inheritance tax went untouched at the Chancellor’s spring budget despite rumours in the weeks beforehand, and this morning’s tax take figures illustrate exactly why the Chancellor would have been keen to leave it well alone.”
Just Group communications director Stephen Lowe agrees. He says: “With one-month of the 2023/24 financial year to go, IHT looks certain to record another all-time receipts high. The February receipts announced today were £564 million leaving only £263 million to be raised in March, in order for this year’s IHT tax take to exceed last year’s already record amount.
“Despite speculation that the Chancellor would tinker with IHT Tax in the Spring Budget it was left alone – and with public finances so tight, it is little wonder. Frozen thresholds and the increase in property values have dragged more estates into paying the tax. We would encourage people to assess the entire value of their estate, including an up-to-date valuation of their property, and familiarise themselves with the IHT rules.
Evelyn Partners tax partner Laura Hayward says: “The importance and impact of IHT is set to grow as there is a massive transfer of wealth in the offing in the next couple of decades. Research shows that the older generations have as much as £2.6 trillion of equity tied up in their homes, which the next generation, or the one after, are set to inherit.
“With nil-rate band allowances currently frozen and shrinking in real terms with inflation, that could lead to an explosion in IHT liabilities, if rules remain the same.
“Even without a wave of wealth being transferred, more estates, and more assets in each liable estate, are being dragged over the threshold at which IHT kicks in, which has been frozen at £325,000 since April 2009.”
Accountancy firm Mazars partner Paul Barham says: “IHT receipts are on track to rewrite the record books again in 23/24. Receipts are up £0.4 billion on last year with frozen thresholds and increasing asset wealth pulling more families across the threshold.
“But it’s not only IHT in the spotlight. Capital Gains Tax (CGT) raises more significant money for the Treasury’s finances, and that is without the slashing of the tax-free allowances, which will kick in this April.”
CGT is charged on asset gains, including profits made on the sale of a second property, such as a buy-to-let or holiday home.
Canada Life technical manager, tax trusts and estate planning Stacey Love adds: “IHT is largely a discretionary tax, in that many estates may not have to pay it at all if the various exemptions and gifts are used appropriately. This is an area of planning where it really does pay to seek appropriate financial advice.
“A regulated and qualified financial adviser can help ensure financial affairs are not only put in order for today, but so that future generations benefit fully from any financial legacy.”
