IHT receipts hit £600m this tax year

Inheritance tax receipts hit £600m in April 2023, according to data released by HMRC today (23 May), which is £100m more than in April of the previous tax year. 

This comes as years of house price increases, soaring inflation, and tax freezes have pushed an increasing number of families that would not consider themselves to be wealthy above the threshold for inheritance tax. 

The tax-free inheritance allowance, which is called the nil-rate band, applies to everyone and can pass on up to £325k of a person’s estate without having to pay any IHT.

However, anything above £325k could be subject to up to 40% inheritance tax. 

While the nil-rate band has stayed at the same level since April 2009, inflation has cut the value of the relief by 32.8% over that time as the average house price also increased nearly 85%. 

Some homeowners can also benefit from a ‘residence nil-rate band’ of up to £175k on top of the nil-rate band. This, however, only applies when you pass on your main residence to a direct descendant. The ‘residence nil-rate band’ has been frozen at £175k since April 2020. 

Alex Davies, CEO and founder of Wealth Club, said: “The 2023/24 tax year is looking likely to be yet another record-breaking year for inheritance tax. It really is a cash cow for HMRC. There are rumours inheritance tax cut could be cut in the run up to the next general election, with the government potentially increasing the threshold at which an estate becomes liable for inheritance tax. 

“Alternatively, the government might consider a cut in the headline rate of tax. Either would be very welcome by the large numbers of affluent, but far from uber rich, households that are being hit by this most hated of taxes.”

He added: “But in some circles, inheritance tax is already called the voluntary tax because so much can be avoided or mitigated through government backed investment schemes and careful tax planning. Writing a will is a good start. If you don’t your assets will be distributed according to intestacy rules and could be subject to IHT which could otherwise be avoided.”