HMRC’s intake from Inheritance Tax receipts rose £100m to £4.4bn during the period from April to September this year as rising property prices and a frozen threshold meant more people paid the tax.
IHT payments are set to hit a record high this year and accelerate after new measures come into effect next year.
“The Treasury is on course for another record-breaking year of revenues from inheritance tax (IHT),” said Ian Dyall, Head of Estate Planning at wealth management firm Evelyn Partners.
“With the nil-rate band frozen at £325,000 since 2009 and the residence nil-rate band static at £175,000, fiscal drag is quietly pulling thousands more families into the IHT net as asset values increase year-by-year.
“The APR/BPR crackdown next April and the inclusion of pensions in estates from the following April will compound the effect, meaning households who would never consider themselves “wealthy” suddenly face significant tax exposure. The Office for Budget Responsibility forecasts receipts will exceed £9 billion by 2026, and potentially £14 billion by 2030.”
Despite IHT being set to sky rocket in the coming years, Chancellor Rachael Reeves is reported eyeing up additional changes to increase inheritance tax receipts further. These include changes to gifting rules that have previously been safe from IHT.
“Gifts made more than 7 years prior to death are completely free of inheritance tax, while regular gifts made out of surplus income are free from IHT immediately,” said Nicholas Hyett, Investment Manager at Wealth Club.
“Shifting the seven-year rule to a ten-year rule is one option. Gifts made up to ten years before death could be taxed as if they were part of the estate – making one-off gifts to children to help with things like buying a new house potentially problematic, especially for those who die young, piling financial pain on top of personal grief.”