Bereaved households stump up £6.3bn in inheritance tax since April 2023

The Treasury raked in £6.3billion from inheritance tax receipts within the interval from April 2023 to January 2024, new information from HM Revenue & Customs reveals.

The inheritance tax take for the interval was £400million increased than by the identical level a 12 months earlier. 

According to an evaluation by Evelyn Partners, the Treasury is on target to take report inheritance tax receipts of round £7.6billion within the present tax 12 months, up from an all-time excessive of £7.1billion the earlier 12 months.

Chancellor Jeremy Hunt is beneath strain to spice up the economic system at subsequent month’s Budget, with some calling for inheritance tax to be scrapped.

Rumours swirled within the run as much as final 12 months’s Autumn Statement that Hunt would reform or scrap inheritance tax, however no modifications materialised.  

Raking it in: The Treasury made £6.3bn from inheritance tax receipts within the interval from April 2023 to January 2024

On Wednesday, the Treasury stated increased inheritance tax receipts in June 2022, November 2022, June 2023 and October 2023 could possibly be attributed to ‘a small variety of higher-value funds than typical.’

In June 2023, HMRC information confirmed bereaved households paid £1.2billion value of inheritance tax in simply eight weeks. 

A freeze on exemption ranges and, in lots of circumstances, increased property costs, helps enhance the variety of households falling within the scope of inheritance tax. 

The nil-rate band, which is the speed at which an property pays no IHT, has stayed put at £325,000, pulling an ever-growing variety of individuals into its internet.

This nil-rate band has been in place since 2010 and Hunt has prolonged a freeze on it till 2028.

It is, nonetheless, doable for individuals to utilize the ‘residence nil-rate band’ with the intention to cross on a essential residence to their youngsters. 

Under this rule, the allowance is raised by £175,000, that means dad and mom or grandparents can cross on £500,000 every to direct descendants earlier than inheritance tax kicks in.

What’s subsequent? Chancellor Jeremy Hunt is saying the brand new Budget on 6 March 

Despised by many, inheritance tax is commonly seen as a broader technique of ‘fiscal drag’, whereby tax thresholds and allowances don’t sustain with inflation or wage development, leading to extra tax being paid. 

Laura Hayward, a tax accomplice at Evelyn Partners, stated: ‘Although a comparatively small variety of massive estates are usually behind the lion’s share of annual inheritance tax revenues, that is being supplemented by 1000’s of extra modest inheritances.’

She added: ‘Minor property downturns resembling we have seen within the final 12 months or so will do little to dent this development. And although the Covid impact on mortality, which was at one level growing the general inheritance tax take, should now have all-but performed out, inheritance tax receipts proceed to rise.’

On whether or not Hunt might alter inheritance tax guidelines in subsequent month’s Budget, Hayward stated: ‘Whether it is on account of a plugging of leaks on the Treasury, or to a change of coronary heart at No.10 and No.11, the Budget hearsay mill has gone quiet with regards to inheritance tax.

‘Despite being paid by a small proportion of estates, IHT is unpopular and has attracted consideration as one of many taxes the Chancellor might look to chop on the spring Budget, in a final roll of the fiscal cube earlier than the election battle correct commences.’

She added: ‘As an inheritance tax reduce would have little speedy affect on households’ monetary scenario, it is maybe extra seemingly {that a} pledge on inheritance tax will characteristic within the Conservative manifesto quite than within the Budget – notably as it would enchantment to and inspire a number of the occasion’s core voting demographic.’

Nicholas Hyett, funding supervisor at Wealth Club, stated: ‘The Government appears to be rowing again on potential tax cuts on the March Budget. 

‘And with inheritance tax an ever rising income, you possibly can see why the Chancellor may discover it troublesome to chop this most unpopular of taxes. Any shortfall would imply increased tax or decrease spending elsewhere.’