Inheritance TaxMar 21 2023

Govt sees IHT boost of almost £1bn

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Govt sees IHT boost of almost £1bn
The total inheritance tax intake for 2021/22 - the last full financial year - was £6.1bn, meaning this year's intake has already surpassed last year's.

HM Revenue and Customs saw a boost of almost £1bn last year in inheritance tax receipts. 

Inheritance tax intake for April 2022 to February 2023 totalled £6.4bn, an increase of £0.9bn on the same period a year earlier. 

The total inheritance tax intake for 2021/22 - the last full financial year - was £6.1bn, meaning this year's intake has already surpassed last year's.

Commenting on the figures, business development manager at estate planning firm Zedra, Laura Tommis said the boost comes as little surprise given last year’s steep rise in inflation and the stagnant tax thresholds of recent years.

“Many families who have not considered themselves wealthy or thought their estates could be within the remit of IHT have been dragged into the statistics.

“With both the nil rate band and residence nil rate band allowances frozen until 2027/28, it is inevitable that this trend will only continue,” Tommis said.

Under UK law, inheritance tax is paid at 40 per cent on assets valued above a certain threshold. Currently around one in every 25 estates pay the tax.

Evelyn Partners tax partner, Laura Hayward said the latest figures serve as a reminder that families should give careful consideration as to how best to manage their tax planning so they do not pay more tax than they need to. 

While last week's Spring Budget saw significant change to pension tax thresholds, in particular the scraping of the lifetime allowance, no significant changes were made to how the government collects or charges inheritance tax. 

“The overall silence in this area shouldn’t be taken that the IHT pain on families is being eased," Hayward said.

"In fact, new forecasts published by the Office of Budget Responsibility on the same day as the chancellor’s statement suggest IHT receipts will grow by almost £3bn higher than previously estimated over the next six years."

It’s now predicted that between 2022/23 and 2027/28 the Treasury will collect £45bn in IHT receipts, a rise from the £42.1bn estimate released in November. 

"As today’s data reveals, IHT receipts are becoming an increasingly important way for the government to boost their coffers," Hayward added. 

"Families that find they are being dragged above the IHT threshold may wish to consider taking relatively easy steps to manage their exposure to IHT."

Hayward noted that the abolition of the lifetime allowance is of benefit to those looking for tax-efficient death planning.

“The scrapping of the lifetime allowance for pensions in last week’s Budget will greatly increase the IHT breaks available for people with wealth to pass down to the next generation, as pensions are generally exempt from IHT," she said.