Treasurer Jeremy Hunt is under “pressure” to introduce inheritance tax (IHT) relief in next month’s spring budget.
Experts are calling on the government to reverse its decision to freeze the levy until April 2028 due to the fiscal drag.
This is a term used to describe when, due to inflation and rising wages, households end up paying more to HM Revenue and Customs (HMRC) because their tax bill remains the same.
Government figures show IHT income from April 2023 to January 2024 was £6.3bn, an increase of £400m on the same period last year.
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More and more households are struggling to pay inheritance tax
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These statistics show that more households in the UK are breaching the controversial tax.
Inheritance tax is levied on assets such as money, property, and properties of a deceased person.
Typically, estates worth over the £325,000 threshold are taxed at 40 per cent, but if the deceased leaves more than 10 per cent to charity, this amount is reduced to 36 per cent, and how people can increase it There is also their threshold.
It is estimated that around 1 in 25 households in the UK, or 4%, will have to pay inheritance tax.
Households are being dragged into paying IHT on properties as house prices rise while allowances remain frozen.
Earlier this week, HMRC reported that the total tax bill for April 2023 to January 2024 had reached a staggering £695.1bn.
This is £33.6 billion more than in the same period in 2022 and the beginning of 2023, and experts believe it could be an incentive for Mr Hunt to introduce tax cuts.
Edward Grant, director of tax and technical services at St James’s Place, suggested that inheritance tax relief may be on the table.
Gifts can reduce inheritance tax, but rules still apply getty
He said: “Self-assessed income tax income was down by £900m compared to the same period last year.
“However, monthly income tax, NIC and CGT receipts continue to show year-on-year tax increases, giving the Chancellor potential headroom for future tax cuts in the Spring Budget on 6 March 2024. .”
“In the longer term, we will continue to see the impact on incomes of the IHT threshold being frozen at 2020/21 levels.
“This continues to put pressure on the Prime Minister for a vote to reduce IHT.”
Last month, the government cut National Insurance rates from 12% to 10%, and Chancellor Rishi Sunak announced further tax cuts by the end of the year.
