The government has now taken £6.4bn in inheritance tax (IHT) since April last year, new HMRC figures have revealed.

This latest figure, which covers up to the end of February, is an increase of £900m on the same period a year earlier.

HMRC has stated that the current IHT intake includes higher receipts in June and November last year, which it attributed to a small number of higher-value payments than usual.

The number of estates getting pulled into the IHT net has grown in the last few years, largely as a result of rising house prices, particularly in London and the South East of England.

On top of this, in the Chancellor’s Autumn Statement last November, Jeremy Hunt announced a freeze on the IHT threshold of £325,000 until April 2028, in a move that will likely push more people over the IHT threshold in the coming years.

While there were no significant changes to the current IHT rules in Hunt’s Budget last week, new forecasts, published on the same day by the Office of Budget Responsibility (OBR), indicated that IHT receipts will grow by almost £3bn higher than previously estimated over the next six years. The OBR is now predicting that between the 2022/23 and 2027/28 tax years, the Treasury will collect £45bn in IHT receipts, a rise from the £42.1bn estimate released in November.  

Group communications director at Just Group, Stephen Lowe, said the Chancellor is benefitting from “the pincer movement” of recent rises in property prices and frozen thresholds.

“IHT is an increasingly valuable source of income for the government which has raked in a record sum even with one month of this tax year’s receipts yet to be collected,” Lowe added.

“The Treasury appears to be banking on ever greater receipts from Inheritance Tax. Buried in the small print of the Spring Budget was confirmation that the government expects to scoop up nearly an extra £3bn from IHT over the next six years. In total, the tax is set to add £45bn to government coffers and by the end of that period around one in every 15 deaths is expected to trigger an IHT charge.

“With an ever-growing proportion of estates likely to become liable to paying IHT, it is increasingly important that people are regularly assessing the value of their estates. This should include getting an up-to-date valuation of any owned property given the substantial house price increases generated through the pandemic.”

Tax partner at Evelyn Partners, Laura Hayward, added that the freeze on the nil rate band, unchanged since it was increased to £325,000 from April 2009, is a “gift that keeps on giving” for the Chancellor.

“The almost 20-year freeze in the nil rate band, coupled with inflationary growth of asset values, will see many families with moderate levels of wealth being drawn into the IHT net,” Howard added. “Families that find they are being dragged above the IHT threshold may wish to consider taking relatively easy steps to manage their exposure to IHT.”

She added: “The scrapping of the lifetime allowance for pensions in last week’s Budget will greatly increase the IHT breaks available for people with wealth to pass down to the next generation, as pensions are generally exempt from IHT.

“Therefore pensions could now be considered a vehicle for tax efficient death planning, without any intention of ever drawing the money out. But people should be aware that pension rules could easily be changed again in the future, only to find this tax advantage withdrawn at the point that it really matters.”

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