Inheritance TaxMay 23 2023

Rise of IHT intake ‘seems to be unstoppable’

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Rise of IHT intake ‘seems to be unstoppable’

The latest figures from HM Revenue and Customs, show that the government’s intake of inheritance tax has continued to expand.

The figures released today (May 23), show that IHT receipts for April totalled £0.6bn - a year-on-year increase of £0.1bn.  

“Given the inflationary growth of asset values coupled with frozen allowances, the rise and rise of IHT receipts seems to be unstoppable,” Evelyn Partners tax partner Laura Hayward said.

“The nil rate band remains frozen at £325,000 until at least April 2028 so, as things stand, even more families are expected to be caught by IHT in the months and years ahead,” she added. 

Forecasts by the Office of Budget Responsibility published alongside the Spring Budget in March, predicted that between the tax years 2022 and 2028 the Treasury will collect £45bn in IHT receipts.

This is up from the £42.1bn estimated only last November. 

“Today’s update from HMRC should be a wake-up call for families to give careful thought to their tax planning to ensure they don’t pay more tax than they need to. Families can minimise the chances of being hit by a hefty IHT bill by taking action now,” Hayward said.

“There are a number of ways of reducing or eliminating IHT bills, such as making gifts to family members or investing tax-efficiently. 

“Gifts you make to other individuals are generally not subject to IHT unless you die within seven years. There is also an annual gift allowance of up to £3,000 per tax year, and this will not be subject to IHT even if you do die within seven years,” she explained. 

According to Quilter, the high intake has been a way for the government to boost its coffers “by stealth”.

Rosie Hooper, a chartered financial planner at Quilter noted that the latest figures follow a record-breaking intake in the tax year 2022/23. 

“Historically IHT was viewed as a tax only for the very wealthy, but frozen tax thresholds and elevated house prices have seen far more people caught by the IHT net. 

"The chancellor’s extended freeze has already proven effective, raking in a significant amount by stealth with a £1bn increase in the inheritance tax take in the 2022/23 tax year. If the current pattern continues, we can expect to see a similar increase this tax year,” Hooper said. 

She added: “IHT is a hated tax and the ever-increasing tax revenue from IHT presents a conundrum for the government now we are possibly only a year from a general election."

There has been speculation by some that the tax may be cut by the Conservative party as a manifesto pledge in the run up to the next general election.

“Considering it is a growing revenue generator, this government might find the prospect of lowering the tax a bitter pill to swallow, but there it would be likely to drum up support,” Hooper added.