IHT receipts increase to £5.2bn in November

Inheritance tax (IHT) receipts have reached a total of £5.2bn between April and November 2023, a £400m increase on the same period last year, HM Revenue and Customs (HMRC) has found.

IHT is typically paid at a rate of 40% over certain thresholds, although the money can be passed on, tax-free, to a spouse or civil partner, who will then inherit that allowance for when they pass away.

The main threshold is the nil-rate band and applies to the majority of people in the UK, enabling up to £325,000 of an estate to be passed on without having to pay any IHT. This has been unchanged since 2009.

However, there is also a residence nil-rate band, worth £175,000, which allows most people to pass on a family home more tax efficiently through direct descendants, although this tapers for estates over £2m and is not available for estates over £2.35m.

Investment manager at Wealth Club, Nicholas Hyett, said: "The Treasury raked in an extra £5.2m from IHT from April to November 2023 and this number is increasing steadily, month after month, and year after year. Last year it raised more than £7bn for HMRC but could hit £9.5bn before the end of the decade.

"While just 4% of estates pay inheritance tax at the moment, freezing the nil-rate and residence nil-rate bands for years means people who would not have been considered wealthy in the past will end up getting caught out by this most hated of taxes."

Currently, one in 25 (4%) of estates pay IHT, but the freeze on thresholds, decades of house price increases and high inflation is bringing more estates above the threshold, the Wealth Club has said.

Estimatesby the group suggested that by 2032-33, over 7% of the proportion of deaths in the UK will result in IHT being collected.

Hyett added: "For those that are picking up the ‘death tax-tab’, Wealth Club calculations suggest the average bill could increase to £233,000 this 2023/24 tax year, with over 30,000 families having to hand over part of their inheritance to the taxman.

"This is a steep 9% increase from the £214,000 average paid just three years ago and a 12% rise in the number of estates paying the tax."



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