IHT receipts reach record £7.5bn in 2023/24

The amount of inheritance tax (IHT) collected in the 2023/24 financial year hit a record £7.5bn, with analysts expecting receipts to reach almost £10bn by the end of the decade.

HM Revenue and Customs (HMRC) has revealed that IHT receipts increased by £400m year-on-year, after £7.1bn was collected in 2022/23.

The last financial year was also the third consecutive year that the record amount of IHT was collected.

Group communications director at Just Group, Stephen Lowe, said: "For a third successive year, IHT has raised a record sum for the Treasury as frozen thresholds combine with house price rises to drag more estates into paying the tax.

"The prospect of a General Election looms large with one expected to be held in the second half of the year and it is likely that tax cuts and the economy will feature prominently in the coming months. We are already seeing public discussion about whether certain tax reliefs should be scrapped to make the ways wealth can be passed down between generations fairer, and we expect this to continue as we get closer to the election."

With the amount of IHT being collected increasing year-on-year, the Office for Budget Responsibility (OBR) has predicted that on its current trajectory, IHT receipts will reach £9.8bn by the 2028/29 financial year.

Tax partner at Evelyn Partners, Laura Hayward, added: "The OBR itself noted last month that IHT receipts are set to hit £9.7bn in 2028/29, which will be 0.30% of GDP – twice the 0.15% it was in 2009, when nominal receipts totalled £2.4billion. This is ‘mainly due to rises in asset prices... The rise also reflects significant fiscal drag as the IHT threshold has remained at £325,000 since 2009’.

"Even without an exceptional transfer of wealth, more estates and more assets in each liable estate are being dragged over the threshold at which IHT kicks in as the value of financial assets and property increases. The modest property downturn of the last year or so, which missed some parts of the UK entirely, seems be over - so with the residential nil-rate band also frozen at £175,000, the trend of families or individuals with modest levels of wealth mostly held in property being subject to this 40% tax will continue.

"It isn’t the so-called boomer generation, wealthy or otherwise, who will foot the IHT bill on their estates – it’s their potentially struggling children and grandchildren who could be parted from a big chunk of the hard-earned family savings. Any future government tempted to fill gaps in the public finances by increasing the IHT burden further will have to reckon with the deep-seated aversion that most households have towards the imposition of death duties."

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