HM Revenue & Customs (HMRC) published its second update for 2023/24 and found it collected £1.2bn ($1.52bn, €1.4bn) in inheritance tax (IHT) in the first two months of the financial year.
This marks a 13% increase from the £1.1bn raised by this point last year, suggesting that last year’s record-breaking IHT receipts look set to be broken.
The UK taxman raked in £600m in April 2023 in IHT receipts.
International Adviser recently assessed the debate whether IHT should be scrapped or reformed.
‘The gift that keeps on giving’
Stephen Lowe, group communications director at Just Group, said: “It’s clear that with the current thresholds frozen until 2028 and the increases in property prices during the pandemic, IHT looks set to be the ‘gift that keeps on giving’ for the chancellor of the exchequer – but at what political cost?
“With households feeling the pinch and a general election looming, political parties of all persuasions will be looking for ways to curry favour with the electorate and easing up on IHT might be one option they consider. Regardless of which way the political breeze blows, rising IHT receipts should act as a warning for people to remember to assess the entire value of their estate, including an up-to-date valuation of their property.
“Professional, regulated advice can also help people work out the total value of their estate, calculate how much tax they may be likely to owe and understand what options they have to manage that tax bill.”
Laura Hayward, tax partner at Evelyn Partners, added: “IHT has become a real hot potato in recent weeks, with some putting pressure on the government to commit to abolish the tax.
“However, it’s important to remember that no decisions have been announced yet and while this debate bubbles away, more families are being dragged into paying IHT.
“Families should use today’s update from HMRC as a reminder to take a close look at their tax planning with a professional adviser to ensure they don’t pay more tax than they need to. Making gifts can be one way of reducing or eliminating IHT bills.
“Trusts can also be a powerful tool with many different uses when it comes to IHT planning, depending on the family’s requirements and circumstances. Many people choose to make gifts in trust so that the money can only be accessed at a certain time or for a particular reason. Life insurance can be set up in a trust, so that the money can be accessed immediately to pay an inheritance tax bill.
“Families can also consider other areas, such as using tax-efficient investments, which could benefit from business relief and reduce or eliminate IHT bills.”