Inheritance Tax  

Inheritance tax reaches new half year record

Inheritance tax reaches new half year record
 

Some £3.5bn of inheritance tax was added to Treasury coffers in the first half of this tax year, the highest on record.

Figures from HM Revenue & Customs released today (October 21), show that £557mn was collected from the tax in September, a slight drop on the £576mn a month before. 

Monthly inheritance tax receipts 2022

MonthIHT take 

May

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£564mn

June

£726mn

July

£570mn

August

£576mn

September

£557mn

Source: HMRC

The increase in tax receipts, which rose by £400mn year-on-year, will be “music to the ears” of the Treasury, said Julia Rosenbloom, tax partner at Evelyn Partners.

“Given the current state of the UK economy and need to boost the government’s coffers, new chancellor Jeremy Hunt will want to do all he can to preserve cash cows, such as IHT receipts, until stability is restored to the nation’s finances.”

Given the turmoil of the government over the past few weeks, any reduction or even abolition of the tax seems unlikely, Rosenbloom added.

“Families face the bleak reality that even if the IHT regime remains unchanged in the months ahead, more people will be pushed into its scope. 

“Frozen allowances – in the form of the nil rate band and residence nil rate band which have both been locked into place until at least April 2026 – and at least historical rises in house prices are pushing IHT receipts upwards.”

IHT is a 40 per cent tax paid on death if a person’s assets exceed a certain threshold.

This threshold, the nil rate band, has been £325,000 per single person since April 2009, and is due to remain frozen at this level until the 2025-26 tax year.

There is also a transferable main residence nil rate bank of £175,000 which is available when passing down the family home.

This freezing of thresholds, combined with rising house prices, has led more people to be caught up in the tax.

Group communications director at Just Group, Stephen Lowe, said the figures are another reminder that people should regularly assess the full value of their estate to get a clearer picture of whether the tax will affect them.

“For some people, options such as lifetime mortgages could be an opportunity to unlock a portion of their wealth tied up in bricks and mortar."

Professional, regulated advice can provide "invaluable" help for people working out how to manage their finances in later life, he added.

sally.hickey@ft.com