Inheritance Tax  

IHT receipts continue to drop

IHT receipts continue to drop

Inheritance tax receipts (IHT) have decreased for the past two months despite an upward trajectory in the beginning of the year, according to HM Revenue and Custom’s latest data.

HMRC statistics released today (July 19) showed that in June 2019 IHT receipts accounted for £357m, representing a drop of 9 per cent compared with the £393m raised in May and 30 per cent compared with the same month last year.

This was after IHT bills were on an upward trajectory in the past 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.

For the first three months of 2019 IHT receipts increased until they reached a peak at £537bn in March. But they have declined since.

Despite receipts from April to June being 15 per cent lower than in the same period the previous year, Gordon Andrews, tax and financial planning expert at Quilter, did not think there was a downward trend.

He said: "A 15 per cent year on year drop in IHT might appear as good news for the public, however unfortunately there is little evidence to suggest it is part of a sustained fall and in fact is just part of the regular fluctuations in tax revenue."

He added: "The IHT system is unnecessarily complex and it means the public spend an undue amount of time worrying about how they set up their estate so their legacy isn’t reduced by taxes when it doesn’t need to be."

A review of IHT rules was commissioned by the government in order to simplify the system. 

The first report from the Office for National Statistics (ONS), out last November, recommended the government should move to a fully digital system for inheritance tax.

A final report, published earlier this month (July 5), proposed a change to the ‘seven-year rule’ of taxing gifts alongside changes to the taper relief and others.

However, Mr Andrews has warned that "further tinkering" with the IHT system may make rules more complicated.

He said: "Before the government jump feet first into making these changes they need to step back and reflect on the purpose and vision of IHT. If its purpose is to tax people based on how much wealth they have then the research is pointing to the necessity of reform."

He added: "Chancellor Philip Hammond ordered this review over a year ago. With the current Tory leadership battle, it is likely that we will have a new Chancellor in place soon and these recommendations may fall on deaf ears. 

"However, one hopes the new Chancellor will recognise that changes to IHT could be a nice giveaway for the Conservatives if and when they have to head into a general election. 

"Really though this should be a cross-party initiative as rules regarding inheritance tax are, by their very nature, long term and require advanced planning. A constantly shifting framework makes such planning impossible."