Inheritance tax (IHT) receipts collected between April and August 2024 increased by £300m year-on-year, with the total collected for the year reaching £3.5bn, HMRC has revealed.
HMRC said that higher receipts since March 2022 are from a combination of volumes of wealth transfers following IHT-liable deaths, recent rises in asset values and the previous Government’s decision to maintain the IHT tax free thresholds until 2027/28.
The Office for Budget Responsibility (OBR) has predicted that IHT receipts will continue to rise and has forecast that the total tax take will reach £9.7bn a year by 2028/29, having reached a record £7.5bn in 2023/24.
The figures come as rumours circulate that the Government may target IHT as an area to help fund economic recovery in the UK.
Tax partner at Evelyn Partners, Laura Hayward, said: "Rising IHT receipts are a fact of life for the Treasury but even at the current rate of 9.4% on the year they aren’t rising fast enough to help fill the 'black hole' that the Government says it has identified in the public finances.
"It’s by no means certain that the Chancellor will target the transfer of wealth to raise more tax revenue, but if she does then including defined contribution pension pots in the value of estates for IHT purposes seems to the front-runner in the line-up of possible changes."
Specialist financial adviser at Wesleyan Financial Services, Jonathan Halberda, added: "With speculation rife that the current IHT rules may be tightened in the Autumn Statement, we’ve already started to see people accelerate plans to pass on their wealth.
"Loan Trusts are proving a popular option; these allow people to invest capital for a period of time, during which any gains go to a trust for loved ones and aren’t impacted by IHT. The original capital is ultimately returned to your estate.
"This is just one of a range of exemptions and tax reliefs that can be used to help families manage their liabilities. However, this is a complex issue, so it’s important to speak to a specialist adviser to understand the best options for your specific circumstances."
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