Inheritance tax (IHT) has increased by a further £603m in July, and receipts for April to July 2023 currently stand at £2.6bn, an increase of £200m compared to the same period in 2022, HM Revenue and Customs (HMRC) has revealed.

Despite IHT bringing in a record £7.1bn in 2022, the latest financial year (2023/24) is already set to beat that, with £2bn in the first quarter of 2023.

Property price gains and frozen thresholds are nudging more households into paying the tax with HMRC revealing that 27,000 estates paid IHT in the 2020/21 financial year, which marks a 17% increase compared to the previous year.

Group communications director at Just Group, Stephen Lowe, said: “IHT continues to rake in cash for the Government as property prices tip more estates into the system’s frozen thresholds. This is evident in the spike in the number of estates paying inheritance tax in 2020/21.

“The result is that the Government looks set to gain bumper returns from IHT for the foreseeable future, as reflected in Office of Budget Responsibility (OBR) estimates suggesting it will be generating over £8bn a year by 2027/28.
 
“These big numbers are good news for the Exchequer but a warning for the public, reminding them to assess the entire value of their estate including an up-to-date valuation of their property.
 
“Professional, regulated advice can also help people work out the total value of their estate, calculate how much tax they may be likely to owe and understand what options they have to manage that tax bill.”

Despite the increases in IHT year-on-year, there is still talk that the Conservative Government may be scrapping the tax, with more people having to pay IHT and potentially make hard decisions on how to foot the bill.

Tax partner at Evelyn Partners, Laura Hayward, said: “The speculation about scrapping IHT as part of a Conservative manifesto pledge at the next general election has quietened down somewhat while many in Westminster are on their summer holidays. But what isn’t taking a break are the year-on-year rises in IHT receipts that are continuing to prove extremely lucrative for the Treasury, as today’s update from HMRC demonstrates.

“Inflationary growth of asset values coupled with frozen allowances mean that an ever increasing number of people are being dragged into paying IHT which can leave the descendants of those who have passed away in a difficult position. Loved ones may need to sell family homes or take on more debt if they need to settle a large IHT bill.

“There is nothing to suggest that the year-on-year increases in IHT receipts will end anytime soon. In fact, the OBR has predicted that the amount collected from IHT receipts will grow from £7.2bn for this tax year to £8.4bn by 2007/28. Families may want to take professional tax planning advice to ensure they don’t pay more tax than they need to.”

Share Story: