Inheritance Tax Receipts increased £300m year-on-year to £3.2bn in the five months from April to August, according to the latest data released today by HMRC.
This continues the upwards trend over the past decade, as one in every 25 estates are caught by the tax.
The number of estates paying the tax has been pushed higher by the freeze on IHT thresholds, decades of house price rises, and high inflation.
According to Wealth Club, the average IHT bill could increase to just over £234,000 this 2023/24 tax year. This is a 11% increase from the £214,000 average paid just three years ago.
Rachael Griffin, tax and Financial Planning expert at Quilter, said the total IHT take for this year could come close to £8bn.
She said: “IHT receipts from April to August 2023 reached £3.2bn, £0.3bn higher than the same period last year. The total inheritance tax take for the 2022-23 tax year was £7.1bn, meaning this year’s take is well on course to break new records and could come close to £8bn.
“This increasing revenue causes a policy conundrum for the government as election season draws nearer and more Tory backbenchers call for inheritance tax reform or its abolition as a vote-winning tactic. Increasing the inheritance tax threshold to £1m is one of the latest to be tabled, and while it would likely be a crowd pleaser, the government might be less keen given the ever-increasing revenue it is seeing from the tax.”
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Julia Peake, tax and estate planning specialist at Canada Life, warned that those going through estate planning should not count on the Government to keep to its promise to abolish IHT.
She said: “The Tory government have recently talked about a ‘manifesto pledge’ to abolish inheritance tax altogether, if this is the case, it will leave a large £7bn gaping hole in taxes to fill. The question is, what would they be likely to replace this with should they remain in power post the expected General Election which is due anytime next year. Regardless of abolition or reformation (or nothing at all), all signs point to record-breaking year in IHT receipts for HM Treasury.”
Laura Hayward, tax parter at Financial Planning firm Evelyn Partners, said the latest figures should serve as a timely reminder to families to address their estate planning.
She said: “The latest update from HMRC provides a timely reminder for families that they may pay more IHT than they need to if they don’t plan ahead. It’s a complex area and so families may wish to consider taking professional tax planning advice to help them consider the different options available to them.”
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