IHT receipts reach a staggering £1.4bn in just two months

It’s another record high for inheritance tax (IHT) receipts as HMRC’s figures reveal a staggering £1.4bn raked in just the first two months of the 2024-25 tax year, £200m higher than the same period last year. The Office for Budget Responsibility (OBR) has said that inheritance tax receipts show no signs of slowing and has predicted that IHT receipts will continue to rise, forecasting that the tax take will reach a staggering £9.7bn a year by 2028/29. With the newly appointed Labour Government allegedly considering an inheritance tax raid to ‘redistribute’ wealth, this predicted figure could climb even higher. 

The overall HMRC tax receipts for 2023/24 tax year amounted to approximately 7.5bn, an increase from £7.09bn the previous tax year. Meaning if receipts continue the expected trajectory, that is potentially more than £2bn extra in inheritance tax. 

What is IHT? 

Inheritance Tax is a tax levied by the Government on the estate of a deceased person in the UK. This includes all of their assets including property, personal belongings, and investments. 

However, this levy only applies to the total value of the estate that exceeds the IHT threshold or ‘nil-rate band’. As of the 2024/25 tax year, the threshold is set at £325,000 per person. Anything above £325,000 could be subject to up to 40% inheritance tax and anything below this threshold is tax-free. There is an additional allowance known as the residence nil rate band, which allows a further £175,000 per person to be passed down to direct descendants when passing down the main residence. 

Why are IHT receipts continuously on the rise? 

The number of estates across the UK that are being pulled into the IHT net are increasing each year. Total IHT receipts collected by the Government have been steadily on the rise as property prices have risen over the years, made worse given the nil rate band level hasn’t changed since 2009. Added to this the nil rate band threshold has since been frozen at its current level until 2028. This was initially announced by the then Chancellor, Rishi Sunak, in his 2021 Budget. The Budget outlined that the IHT threshold, (among many others) would be frozen for five years until 2026. However, after Chancellor Jeremy Hunt’s Autumn Statement in 2022, it was confirmed that the freeze would be extended for a further two years until April 2028. 

Due to the rising rate of inflation coupled with ever increasing property values across the UK, the freeze essentially means that a greater number of people will cross the inheritance tax threshold each year. Many have been calling this move an example of ‘shadow tax’, as the freeze ultimately means an increasing number of Britons will fall into the tax threshold each year whilst not explicitly increasing tax rates. With the freeze not due to end until April 2028, it’s predicted that the Government will have collected billions in extra inheritance tax. 

The inheritance tax allowance of £325,000 was increased from £312,000 on 6 April 2009 and with the freeze extended to April 2028, that’s a staggering 19 years! 

If you’re interested in how to manage your IHT to ensure the best possible wealth protection for you or your family, we can help. Give us a call on 0333 323 9065 or book a free non-committal initial consultation with a member of our team to find out more.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning, tax or trust advice.