abolish Inheritance Tax

IHT receipts 7.2% higher than last year – HMRC

HM Revenue and Customs figures today revealed that Inheritance Tax receipts for April 2024 were £700million, which is £85million or 7.2% higher than the same month last year.

Laura Hayward, Tax Partner at professional services and wealth management firm Evelyn Partners, said that the IMF this week suggested that the Chancellor “should raise inheritance tax, by broadening its base”. She added:

“…in order to shore up the weakness that its staff diagnose in the UK’s public finances. Today’s tax receipt figures, coming on the back of the 2023/24 data that showed a 5.6 per cent rise in the annual IHT take compared to 2022/23, show that fiscal drag is doing that job for IHT already by stealth.

The IMF’s IHT-raising message is unlikely to gain much traction in the current Government: the last time IHT was making policy news was when speculation had it being cut or even abolished at the Autumn  Statement. But a hawkish sentiment on IHT could find more receptive ears should there be a change of Government.”

Richard Bate, Head of Private Wealth at national law firm Weightmans, said that the “IHT windfall continues for HMRC”. He continued:

“Unless the 2028 deadline for reviewing IHT’s threshold is dramatically brought forward, property values, inflation, and high interest rates will keep on dragging more estates into having to pay it.

Even if an estate isn’t big enough to qualify now, the ‘fiscal drag’ caused by inflation means that it might meet the benchmark for IHT in the future. You should be thinking about how the tax on an estate can be managed if you have assets worth anything close to the current tax-free allowance of £325,000.

There is a host of special circumstances, exemptions and estate planning tactics that can be deployed to reduce exposure to IHT. Gifting money, charitable donations and leaving assets to a spouse are all ways of sensibly reducing the size of the taxable estate. Property and business owners should also explore whether they can qualify for any of the reliefs allowed by the IHT system. Agricultural land and shares in trading businesses, for example, can currently be passed on tax free.”

Hayward said that even if thresholds and rates just remain frozen, the IHT net “will be cast much wider and draw in families” across the UK with “fairly modest levels of wealth in real terms”. She added:

“The Office for Budget Responsibility forecasts that the share of deaths resulting in the payment of inheritance tax will rise to 6.3 per cent by 2028–29, the highest level since the 1970s. That proportion was as low as 2.7 per cent in 2009/10. Revenue from inheritance tax and its predecessors has increased over time in real terms, from around £2billion in 1980/81, to £7.5billion in 2023/24, and will reach almost £9billion by 2028/29 (all amounts in 23/24 prices).

The haul for the Treasury from IHT is likely to escalate in the coming years due to a particular demographic bump. As the wealthy baby boomer generation dies off in the next couple of decades, there will be a massive transfer of wealth. Research shows that the older generations have as much as £2.6trillion of equity tied up in their homes.”

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