IHT raised £6.3bn through current financial year – HMRC

The latest HMRC update finds that Inheritance Tax (IHT) has raised £6.3 billion through the current financial year (April 2023 – January 2024), an increase of 7% on the previous year through the same period (£5.9 billion).

The previous financial year represented a record IHT tax take for the Treasury with £7.1 billion collected, yet 2023/24 looks set to far exceed that total as well as the OBR’s forecast of £7.2 billion – at its current rate IHT could raise over £7.5 billion.

With the Spring Statement on the horizon and the Chancellor potentially looking to cut taxes before a General Election, we can expect to hear more rumours about the government’s plans to reduce or scrap IHT. Stephen Lowe, group communications director at retirement specialist Just Group, commented:

“As we approach the end of the 2023/24, it appears certain that IHT will set another record total for the third successive year. Frozen thresholds and the increase in property prices over recent years are dragging more households into paying the tax and, while IHT still only impacts a small proportion of households, the tax bites deep on those estates affected.

With the Spring Statement looming, the bumper tax-take will no doubt set tongues wagging as to whether the Chancellor will look at cutting Inheritance Tax. We would encourage people to assess the entire value of their estate, including an up-to-date valuation of their property, and familiarise themselves with the Inheritance Tax thresholds.

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 their potential tax liability.”

Rachael Griffin, tax and financial planning expert at Quilter said that inheritance tax had been “hitting the headlines as an area for potential change”, including suggestions of “total abolition, but those rumours have since gone quiet”. She continued:

“Given inheritance tax receipts for April 2023 to January 2024 were £6.3 billion, £0.4 billion higher than the same period last year and on track for another record breaking year, the government is likely to leave it well alone. Though higher house prices and frozen thresholds have seen more people caught by the IHT net in recent years, ultimately, it impacts relatively few families but brings in a tidy sum to boost government coffers which it will be unwilling to relinquish – particularly if other tax cuts are on the table.”

Commenting on IHT receipts rising by £400 million, John Glencross, CEO and Co-Founder of Calculus, said that IHT receipts are on a continuous upward trend, driven by the prolonged freeze on IHT thresholds until at least April 2028. He added:

“The fast-upcoming Spring Budget next month, which may include changes to IHT, could significantly influence the strategies and approaches employed by intermediaries when discussing estate planning with clients. One IHT mitigation approach for advisers and investors to consider is an Enterprise Investment Scheme (EIS) fund. The EIS provides inheritance tax relief, contingent on holding the shares for a minimum of two years and at the time of death. At Calculus, our EIS Fund and Knowledge Intensive EIS Fund not only offer investors the chance to benefit from a diversified and tax-efficient portfolio but also enables them to support innovative UK companies with a strong societal purpose and impact.”

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