Govt’s IHT intake reaches £1.2bn in opening two months of 2023/24

The Government has taken £1.2bn in inheritance tax (IHT) in the months of April and May, new HMRC figures have indicated.

This is around £100m higher compared to the opening two months of the 2022/23 financial year at the same point last year.

Following a record-breaking year which saw £7.1bn raised in IHT during 2022/23, HMRC’s second update for 2023/24 marks a 13% increase from the £1.1bn raised by this point last year, suggesting that last year’s record breaking IHT receipts look set to be broken again.

Latest forecasts from the Office for Budget Responsibility have suggested that IHT will raise £7.2bn for the Government this financial year, and as much as £8.4bn by 2027/28, as more estates get caught by the frozen IHT thresholds.

The number of estates across the UK that have been pulled into the IHT net has been growing in the last few years, largely as a result of rising house prices, and particularly in London and the South East of England. With the IHT threshold of £325,000 frozen until April 2028, more estates are likely to be pushed over the IHT threshold in the next few years.

“IHT receipts are already setting a path to a new record, as HMRC has banked £100m more in the first two months of the new tax year compared to the same period last year,” commented technical director at Canada Life, Andrew Tully.

“With the right planning, IHT can be a largely discretionary tax. But many people have found themselves being dragged into the IHT tax net through the growth in house prices, combined with the freezing of the tax bands.

“Using trusts and gifting, combined with the right retirement income strategy, can all help minimise the value of your estate when it comes to calculating any IHT liability, ensuring it can be passed on to your beneficiaries as efficiently as possible.”

Group communications director at Just Group, Stephen Lowe, added: “It’s clear that with the current thresholds frozen until 2028 and the increases in property prices through the pandemic, IHT looks set to be the gift that keeps on giving for the Chancellor of the Exchequer – but at what political cost?

“With households feeling the pinch and a General Election looming, political parties of all persuasions will be looking for ways to curry favour with the electorate and easing up on IHT might be one option they consider.

“Regardless of which way the political breeze blows, rising IHT receipts should act as a warning for people to remember to assess the entire value of their estate, including an up-to-date valuation 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.”

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