25/09/24

UK: Inheritance tax receipts continue to soar, up 9% before Budget

Inheritance tax receipts hit £3.5bn between April and August, according to the latest HMRC data, up £300mn on a year ago, reports moneyweek.com today

It means the government is on track to collect another record sum in death duties this year, with seven months still to go until the new tax year begins. Inheritance tax has been increasing in recent years thanks to frozen nil-rate bands. These have conspired with high inflation to leave families at the mercy of fiscal drag.

Last tax year (2023/24), IHT receipts totalled £7.5bn – the highest figure ever. This followed on from another record-breaking year of £7.1bn in 2022/23, leaving many looking for ways to reduce their inheritance tax bill. 

The nil-rate bands won’t be reviewed until 2028, which means IHT receipts are only heading in one direction unless the rules are unexpectedly changed. And with a £22bn shortfall in the public finances, any tinkering in the Budget is likely to make IHT rules more (rather than less) punitive.

“In our view, inheritance tax is ripe for reform,” says Jonathan Halberda, specialist financial adviser at Wesleyan Financial Services. “It was designed as a tax for the very wealthiest, but it’s now affecting more people than it was ever originally intended to.”

The Office for Budget Responsibility predicts IHT receipts will reach £9.7bn by 2028/2029.