IHT receipts hit £5.2bn in eight-month window

Inheritance tax receipts increased to £5.2bn in the eight months from April to November 2023, spelling a £400m increase from the same period last year, according to the latest HMRC figures. 

Currently, 4% of estates pay inheritance tax, but the freeze on inheritance tax thresholds, decades of house price increases and high inflation are bringing more and more estates above the threshold. 

The IFS estimates that the proportion of deaths resulting in inheritance tax is set to grow to over 7% by 2032/33. The number of people affected by inheritance tax will still be larger. 

By 2032/33, they predict that one in eight people will have inheritance tax due either on their death or their spouse or civil partner’s death.

Nicholas Hyett, investment manager at Wealth Club, said: “While just 4% of estates pay inheritance tax at the moment, freezing the nil-rate and residence nil-rate bands for years means people who would not have been considered wealthy in the past will end up getting caught out by this most hated of taxes.

“For those that are picking up the ‘death tax-tab’, Wealth Club calculations suggest the average bill could increase to £233k this 2023/24 tax year, with over 30,000 families having to hand over part of their inheritance to the taxman.”

He added: “This is a steep 9% increase from the £214k average paid just three years ago and a 12% rise in the number of estates paying the tax.”