Inheritance tax (IHT) receipts are set to rise to record levels as tax managers continue to “collect more income” from households.
HM Revenue and Customs (HMRC) today confirmed that IHT receipts for April to December 2023 reached £5.7bn.
This equates to an increase of 7.5% and an increase of £400m compared to the same period last year.
The Treasury is set to record a record inheritance tax income of around £7.6bn in the 2023/24 tax year.
Inheritance tax revenue expected to reach record high
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Experts cite fiscal constraints as the reason more households are being forced to pay the levy.
Although the value of real estate has increased due to rising house prices, the basis for paying inheritance tax has not changed.
Currently, Britons pay IHT after someone dies if the value of their estate exceeds £325,000. His tax rate remains at 40%.
Laura Hayward, tax partner at Evelyn Partners, highlighted how fiscal drag comes into play when it comes to inheritance tax.
She explained: “Over the past few decades, IHT has generated higher returns than previously expected as property values have increased due to rising house prices and an increase in investment assets.
“This will attract more assets in each responsible estate and estates above the threshold for triggering IHT, which has been frozen at £325,000 since April 2009. As we’ve seen, a modest decline in real estate will do.” There is little to undermine this trend.
“Overall IHT intake has increased further in recent years, partly due to the impact of coronavirus on mortality rates.”
Tax experts say the levy is “widely unpopular” and is expected to be cut in the next spring budget.
Taxpayers are exceeding the tax threshold for the levy due to fiscal shackles
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But she believes there are tax reform options “to protect families” from paying higher taxes, such as raising the zero tax rate.
Ms Hayward added: “Property and investments tend to appreciate in value over the long term, so if nothing changes, the assets that households have carefully saved will skyrocket beyond the zero-interest rate band. “If interest rates had risen, it would now be £489,700,” he added. Inflation has been going on since April 2009.
“The irony, of course, is that the fiscal drag effect across the tax system could give Jeremy Hunt more leeway to cut his taxes this spring. The increase would likely take more tax revenue away from the increase,” thereby improving the fiscal outlook.
“IHT cuts are unlikely to have an immediate impact on household finances, so inheritance tax pledges are more likely to be included in the Conservative manifesto than in the budget, especially since some This is because it has the potential to appeal to and motivate members of the party’s core voting base. ”
