Inheritance Tax (IHT) raised a further £644 million for the government in August, compared to £576 million in August 2022 as the tax continues to deliver “bumper returns”.
Figures published by the government this week revealed that receipts for April 2023 to August 2023 are £3.2 billion, £0.3 billion higher than in the same period a year earlier.
Receipts in June 2023 were the highest monthly total on record; commentators have attributed some of the increase to the impact of recent Bank of England interest rate rises that HMRC is obliged to charge on overdue tax bills with the increase encouraging personal representatives of some estates to pay any tax due sooner than they otherwise would have done, though note that HMRC are not able to confirm this until full administrative information becomes available.
Stephen Lowe, group communications director at retirement specialist Just Group, said:
“Inheritance Tax receipts continue to swell the Treasury’s coffers as it generates record sums year on year. Frozen thresholds and property price increases are catching thousands more estates in the Inheritance Tax net.
This Spring, HMRC significantly increased its prediction of the number of new estates expected to be dragged into paying Inheritance Tax in 2021 to 2028. It now estimates that almost 50,000 new estates will incur the tax, a near four-fold increase compared to their previous estimate in November 2022.”
Lowe also pointed out that the interest rates should “act as a warning for people remember to assess the entire value of their estate, including an up-to-date valuation their property”.
Rachael Griffin, tax and financial planning expert at Quilter, said:
“This increasing revenue causes a policy conundrum for the government as election season draws nearer and more Tory backbenchers call for inheritance tax reform or its abolition as a vote-winning tactic. Increasing the inheritance tax threshold to £1m is one of the latest to be tabled, and while it would likely be a crowd pleaser, the government might be less keen given the ever-increasing revenue it is seeing from the tax.
The Chancellor has extended the IHT threshold freeze until at least April 2028, and it is looking likely to rake in record amounts by stealth. Higher property prices have upped the number of households falling in the scope of IHT, and while growth has slowed in the housing market, we are still yet to see a significant drop in prices. The value of the average UK home now sits at almost £290,000, just £35,000 less than the frozen £325,000 IHT nil rate band.”