Latest figures show a jump of 44.4% between February and March 2019, worth over £500m ($647m, €577m).
However, the government is unable to explain why.
“Receipts for April 2018 to March 2019 are 3.1% higher than the same period last year and the 18/19 tax year show that IHT receipts are at the highest level both in annual revenue and as a proportion of GDP,” said Rachael Griffin, tax and financial planning expert at Quilter.
“We may see the tax take fall somewhat next month as on April 6th the government increased the residence nil-rate-band (RNRB) to £150,000, which gives people an additional threshold before IHT becomes due on their estate and which they say will remove some of the IHT sting.”
But previous research from Quilter showed that the majority of Brits are not aware of the different tax limits when it comes to inheritance.
An ongoing trend
At the same time, inheritance tax receipts have been steadily growing since 2009 – after a sharp fall in 2007 when the Transferable Nil Rate Band for deaths was introduced and decreasing house prices following the financial crisis (Figure 1 below).
“It is another record year for the amount paid in inheritance tax,” said Neil Jones, wealth management and tax specialist at Canada Life.
“HMRC’s IHT receipts have increased by around £160 million in just a year to just on £5.4 bn in the 2018/2019 tax year, up from £5.2bn in 2017/2018. This continues a consistent, long term trend of increases that shows little sign of slowing down.”
Despite this, the 2019 Q1 spike is unprecedented. A similar trend happened during the 2016/17 financial year when, during the same period, receipts nearly reached £500m, while this year they surpassed that threshold (Figure 2).
Is IHT morally acceptable?
“Taking money from a grieving family who are burdened with the loss of a loved one and sorting their affairs, sounds like something a villain from a Dickensian novel would do,” Griffin added.
“Unfortunately, it’s a very real activity in the modern day and one that is reaping more and more revenue for the government.
“The very fact that people have to be asked which, of numerous complex allowances are available to them is a terrible sign itself. And it is made worse by the woefully low proportion that are aware of them.
“Government claims that it has given the public all the tools it needs to navigate this tax system, but it’s as complex as assembling flat pack furniture with instructions written in a foreign language.
“These kinds of rules should be rethought so people have the freedom to gift to whoever they want and are not constrained by antiquated societal rules. A simple IHT regime gives people far greater opportunity to best plan their estates and make the most difference to future generations.”
Figure 1: IHT receipts 1980-2019 Source: HMRC
Figure 2: IHT reciepts yearly trends 2014 – 2019 Source: HMRC