• April 12, 2024
 IHT receipts £0.4bn higher than same period last year – HMRC

IHT receipts £0.4bn higher than same period last year – HMRC

HM Revenue & Customs (HMRC) data showed that Inheritance Tax (IHT) receipts for April 2023 to February 2024 were £6.8 billion, which is £0.4 billion higher than the same period last year.

The increase of 6.25% means the Treasury is on course to take record receipts of about £7.54billion from IHT in the 2023/24 tax year, after surging to an all-time high of £7.1bn in 2022/23 – a £1billion increase on 2021/22.

Lower receipts in April and May 2020 were due to a temporary issue where HMRC were unable to accept cheques for payment of IHT due to COVID-19, which was resolved, hence the peak in June 2020 receipts. Higher receipts from March 2022 are expected to be due to a combination of higher volumes of wealth transfers following recent IHT-liable deaths, recent rises in asset values, and the government’s March 2021 and Autumn 2022 decisions to maintain the IHT tax free thresholds at their 2020 to 2021 levels up to and including 2027 to 2028, and more information on these decisions are available in the policy papers accompanying the Budget 2021 Finance Bill and the Autumn Finance Bill 2022.

The higher receipts in June 2022, November 2022, June 2023 and October 2023 can be attributed to a small number of higher-value payments than usual, according to the data. Laura Hayward, Tax Partner at professional services and wealth management firm Evelyn Partners, commented:

“The importance and impact of Inheritance Tax is set to grow as there is a massive transfer of wealth in the offing in the next couple of decades. Research shows that the older generations have as much as £2.6trillion of equity tied up in their homes, which the next generation, or the one after, are set to inherit. With nil-rate band allowances currently frozen and shrinking in real terms with inflation, that could lead to an explosion in IHT liabilities, if rules remain the same.

Even without a wave of wealth being transferred, more estates, and more assets in each liable estate, are being dragged over the threshold at which IHT kicks in, which has been frozen at £325,000 since April 2009. The modest property downturn of the last year or so 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 a 40% tax is likely to continue.

Time is running out in this tax year to take advantage of annual gifting allowances but it is still possible to do so, and it is an easy step to take to reduce IHT liability. Unlike ‘potentially exempt transfers’, which could become liable to IHT if the donor dies with seven years, gifting within the annual allowances automatically leaves the estate. It is a good idea though to keep clear records to satisfy any enquiry from HMRC. Moreover, as defined contribution pension pots are very IHT-efficient, some savers might look to use up their annual pension allowance with extra contributions.”

Katie Johnson, Digital Journalist, Today's Media

Digital Journalist, Today's Media Contact: katie.johnson@todaysmedia.co.uk LinkedIn