Latest inheritance tax figures hit £2bn mark in latest HMRC data

The first quarter of the 2023/24 financial year saw £2bn collected by the Treasury in inheritance tax (IHT), HM Revenue and Customs (HMRC) has revealed.

The latest figures follow a record-breaking year in 2022/23, which saw a total of £7.1bn raised in IHT. The latest quarter has raised 11% more than the same period last year, surpassing the previous peak of £1.8bn in Q3 2022/23.

Furthermore, the June 2023 tax receipts recorded an income of £795m, which marks a monthly all-time high.

The Office for Budget Responsibility (OBR) has estimated that IHT will raise £7.2bn in the 2023/24 financial year, with as much as £8.4bn by 2027/28. However, there are rumours that the Government is looking at promising to scrap the tax ahead of the next general election.

Group communication director at retirement specialist Just Group, Stephen Lowe, said: “The IHT juggernaut is picking up pace setting monthly and quarterly record highs for the Treasury. In the opening quarter of this financial year, inheritance tax generated around £22 million every day for the government’s coffers.

“The frozen thresholds and property price increases during the pandemic are still feeding into the system, so as a result the government looks set to receive more from IHT for the foreseeable future. This is reflected in OBR estimates which suggest by 2027/28 it will be generating over £8bn a year.

“But with a general election looming, tax receipts are not this government’s only concern and rumours are swirling that the government could take a radical step to scrap IHT as it looks to curry favour with the voting public.

“Regardless of which way the political breeze blows, these rising IHT receipts should act as a warning for people to remember to assess the entire value of their estate, including an up-to-date valuation their property.

“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 that tax bill.”

Tax partner at Evelyn Partners, Laura Hayward, added: “While reports circulate around Westminster that the Conservatives are considering scrapping IHT as part its manifesto pledge at the next general election, the stark current reality is that more families are being dragged into paying the tax as each month goes by. Inflationary growth of asset values coupled with frozen allowances* are helping ensure that, as things stand, IHT receipts continue to be a lucrative earner for the Treasury.

“Families should not be distracted by IHT being used as a political football and instead focus on their tax planning to ensure they don’t pay more tax than they need to. They can minimise the chances of being hit by a sizeable IHT bill under the current regime by taking the appropriate action now.

“There are a number of ways of reducing or eliminating IHT bills, such as making gifts to family members. Gifts you make are generally not subject to IHT unless you die within seven years. There is also an annual gift allowance of up to £3,000 per tax year, and this will not be subject to IHT even if you do die within seven years.

“Many will want to ensure that their gifts are used responsibly, which can be a particular concern when large amounts of money are passed down to younger members of the family. Trusts can be a powerful IHT planning tool to help combat these concerns. Choosing to make gifts in trust means that money can only be accessed at a certain time or for a particular reason. Life insurance can also be set up in a trust, so that the money can be accessed immediately to pay an IHT bill.”

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