HMRC continues to collect record amounts from inheritance tax, according to the latest data. These figures show the Government collected £6.8bn from inheritance tax between April 2023 and February 2024, a £0.4bn increase on tax receipts over the same period the year before.
These higher tax receipts are largely due to the fact that inheritance tax thresholds have been frozen, and are not due to be reviewed until April 2028. At the same time there has been significant property price inflation, although the housing market has cooled over the past 18 months. The main inheritance tax threshold has stood at £325,000 since 2009.
Inheritance tax was predictably untouched at the Chancellor’s spring budget despite popular press rumours in the weeks beforehand, and the tax take figures illustrate precisely why the Chancellor would have been keen to leave it well alone.
The February receipts were £564 million leaving a mere £263 million to be raised in March, in order for this year’s tax take to exceed last year’s already record amount.
With public finances so tight, it is little wonder. Frozen thresholds and the increase in property values have dragged more estates into paying the tax. Taxpayers who are exposed should consider assessing the entire current value of their estate, including an up-to-date valuation of their property. The importance and impact of inheritance tax is set to grow as there is a massive transfer of wealth in the offing over the next couple of decades. Research indicates that the older generations have as much as £2.6 trillion 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 rapidly shrinking in real terms with inflation, that could lead to an explosion in inheritance tax liabilities, if rules remain unchanged.
Stephen Parnham
April 2024
