Inheritance tax receipts reached £2.2 billion in the first quarter of the current tax year, according to figures published by HM Revenue and Customs (HMRC) today.
The total represents a £100 million increase on the same period last year and shows no sign of slowing down.
Whilst inheritance tax currently affects only a small proportion of estates, this figure is rising as growing numbers of families find themselves liable for what is widely regarded as Britain’s most unpopular levy.
Ordinary families who would not regard themselves as particularly well-off may now face substantial tax bills following the death of a relative.
“The June figure means that Inheritance Tax revenues for this financial year so far are running 4.8% ahead of the same period last year. And let’s not forget that last year was a record one,” said Ian Dyall, head of estate planning at wealth management firm Evelyn Partners.
“Even with the relative softness in the property market suggested by recent house price indices, the trend for more families and more assets attracting IHT liabilities is set to continue as nil rate bands remain frozen.
“Property prices and equity valuation remain at or near all-time highs, and once business and agricultural property reliefs are watered down from next April, and then unspent pension funds become subject to IHT calculations from April 2027, there’s likely to be big jumps in IHT liabilities across the UK, and not just in the South East where they are traditionally concentrated.”
The impact of rising property and stock prices on HMRC’s IHT receipts is being exacerbated by an IHT allowance that hasn’t changed for 16 years and has become disconnected from rising inflation and asset prices.
“The current inheritance tax allowance has been frozen at £325,000 for 16 years, and remains frozen for another 5 years until 2030. The £175,000 residence nil rate band hasn’t changed since 2020,” explained Nicholas Hyett, Investment Manager at Wealth Club
“These freezes are a form of stealth tax, which allows the government to increase their take without a backlash from a headline grabbing tax hike, but still contribute to the highest tax burden in 70 years.”