Inheritance TaxJun 24 2019

IHT receipts down £63m in May

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IHT receipts down £63m in May

Inheritance tax (IHT) receipts are on the rise despite a slight decrease last month, according to HM Revenue and Custom’s latest data.

HMRC statistics released last week (June 21) showed that in May 2019 IHT receipts accounted for £393m, representing a drop of 13 per cent compared with the £456m raised in April and 19 per cent compared with the same month last year.

Despite this, inheritance tax bills continued to rise over the year. In the financial year 2018/19, a record £5.4bn was paid in tax revenue, with the average IHT bill reaching almost £200,000.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: "We’re paying more inheritance tax every year: in 2009/10 we paid £2.38bn, and in 2018/19 we paid £5.37bn.

"Within each year, however, we always see fairly big fluctuations month-to-month. It’s often difficult to pin down exactly why, because you have six months after the person dies in order to pay the tax due, so tax paid in May could relate to a death any time since December last year."

She said probate fees might have played a part this year. Probate fees are due to be reformed, replacing the flat fee system with a tiered structure which will make it more expensive for larger estates.

But although the change was announced last November, there has been a delay in implementing it.

Ms Coles said: "[The government] ended up postponing the change at the 11th hour, but by then families who thought they’d be affected had already powered through probate.

"It pulled forward some of the tax to March – which was up 44 per cent from February – and will have boosted the April figure too, because of families who aimed for March and just missed."

Rachael Griffin, tax and financial planning expert at Quilter, said: "IHT receipts fluctuate between £350m to £550m every month and the long-term trend has seen HMRC pull in more and more each year form inheritance tax.

"The introduction of the transferable nil rate band saw a dramatic reduction in IHT receipts, lifting many estates out of any tax duty on death. But since then then IHT receipts have slowly crept up again and now earn HMRC in excess of £5bn annually."

The nil rate band (NRB), also known as the IHT threshold, is the amount up to which an estate has no IHT to pay.

Unused NRB and residence nil rate band can be transferred to a surviving spouse or civil partner. The NRB for 2019/20 is £325,000 and any estate which exceeds this threshold is charged 40 per cent in IHT.