Inheritance TaxFeb 21 2023

IHT receipts up 15% to £5.9bn

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IHT receipts up 15% to £5.9bn
Pexels/Nataliya Vaitkevich

Inheritance tax receipts for April 2022 to January 2023 stood at £5.9bn, an increase of 15 per cent on the previous year, according to the latest data from HM Revenue & Customs.

According to the data, the figure is £0.9bn higher than at the same point last year.

The total inheritance tax take for 2021-22 - the last full financial year - was £6.1bn, meaning this year is already only £178mn short of that.

Stephen Lowe, group communications director at Just Group, said: “The chancellor has struck a seam of gold with recent inheritance tax receipts as he looks set to receive another record haul this financial year – and with more to come.

“Receipts are likely to race past official predictions for the next few years. The OBR forecast a tax-take of £6.7bn for the current financial year rising to £6.8bn by 2025-2026 but with receipts averaging £588mn a month this year, inheritance tax receipts are on track to exceed £7bn this year.

“The combination of frozen thresholds and property prices that have soared over the years mean that receipts could continue to grow over the coming years.”

Lowe said while it is good news for the Treasury, there will be many people for whom an inheritance tax bill will be a “nasty shock”. 

“These figures provide a reminder for people to assess the value of their estate regularly, taking into account an up-to-date valuation of any property they own,” he said. 

Likewise, Andrew Tully, technical director at Canada Life, said there was no ignoring the fact that the UK is moving in an upward trend and is on track to break last year’s record of £6.1bn by more than 10 per cent. 

“The current tax-free allowance of £325,000 is frozen until 2027/28,” Tully said. “This freeze, plus house prices skyrocketing in recent years, and soaring inflation, mean that more and more families could face an unforeseen and unwelcome inheritance bill from the tax man. 

“Indeed, the belief that IHT is strictly for the affluent no longer applies.”

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

Rachael Griffin, tax and financial planning expert at Quilter, said the latest figures highlight just how “lucrative” the government’s freeze on tax allowances and thresholds is likely to be.

“Given the ongoing cost of living crisis, many people have now received increases in pay and some will have been pushed into the next income tax band as a result,” she said.