The government continues to collect a record amount of inheritance tax, according to the latest data from HM Revenue & Customs.
These figures show that the government collected £6.8 billion from IHT between April 2023 and February 2024, a £0.4 billion increase in tax revenues compared to the same period the year before.
With just one month left of the financial year, this puts IHT revenues at just £0.3 billion short of the record amount it collected in the 2022/2023 tax year.
This higher tax revenue is due to the fact that IHT thresholds have been frozen and will not be reviewed until April 2028. At the same time, there has been significant property price inflation, although the housing market has cooled over the past eighteen months. . The main IHT threshold has been £325,000 since 2009.
Quilter tax and financial planning expert Rachael Griffin says: “Inheritance tax was left untouched in the Chancellor’s spring budget, despite rumors in the weeks before, and this morning’s tax figures illustrate exactly why the Chancellor would have been keen to leave it alone.”
Just Group communications director Stephen Lowe agrees. He said: “With one month of the 2023/24 financial year to go, IHT looks set to post another all-time high in revenues. Revenues announced today for February were £564 million, leaving just £263 million needing to be raised in March so that this year’s IHT tax take could surpass last year’s already record amount.
“Despite speculation that the Chancellor would tinker with the HIT Tax in the spring budget, the country was left alone – and with public finances so tight, it is no wonder. Frozen thresholds and the rise in property values have led to more estates having to pay the tax. We encourage people to assess the full value of their property, including a current property valuation, and familiarize themselves with the IHT rules.
Evelyn Parter’s tax partner Laura Hayward says: “The importance and impact of IHT will increase with a huge wealth transfer looming over the coming decades. Research shows that older generations have as much as £2.6 trillion of equity in their homes, which the next generation, or the generation after, will inherit.
“With zero interest rates currently frozen and shrinking in real terms due to inflation, this could lead to an explosion in IHT liabilities if the rules remain the same.
“Even without a wave of wealth being transferred, more and more estates, and more assets in each liable estate, are being dragged over the threshold at which IHT kicks in, which has been frozen at £325,000 since April 2009.”
Accounting firm Mazars partner Paul Barham says: “IHT receipts are on track to rewrite the record books again in 23/24. Receipts are up by £0.4 billion on last year, with frozen thresholds and rising wealth pushing more and more families over the threshold.
“But it is not only IHT that is in the spotlight. The capital gains tax will bring significantly more money to the Treasury’s finances, and that’s without the reduction in tax-free amounts, which will start in April.”
CGT is charged on capital gains, including the profit made on the sale of a second home, such as a buy-to-let or holiday home.
Stacey Love, Canada Life Technical Manager, Tax Trusts and Estate Planning, adds: “IHT is largely a discretionary tax, in the sense that many estates may not have to pay it at all if the various exemptions and grants are properly applied. are used. This is an area of planning where it really pays to seek appropriate financial advice.
“A regulated and qualified financial adviser can ensure that financial affairs are not only in order for today, but also that future generations can take full advantage of any financial legacies.”