IHT receipts up by £100m against last year

HMRC has revealed that inheritance tax receipts for April and May 2023 reached £1.2bn, a figure that is £0.1bn higher than in the same period last year. 

According to the Office of Budget Responsibility’s last report, it forecasted an expected £38bn will be raised over the next five years, and that in 2027/28, IHT receipts will rise an additional £8.4bn.

The new figures dwarf the lower receipts recorded in April and May 2020, which were attributed to a temporary issue with HMRC not being able to accept cheques for payment of IHT due to Covid-19. 

While the issue was resolved, it led to a peak in receipts in June 2020.

Higher receipts in October to November 2020, March to August 2021, and from March 2022, are expected to be due to a combination of higher volumes of wealth transfers that took place during the pandemic, recent rises in asset values, and the government’s March 2021 decision to maintain the IHT tax free thresholds at their 2020 to 2021 levels up to and including 2027/28.

In addition, the higher receipts in June 2022 and November 2022 can be attributed to a smaller number of higher-value payments than usual.

Laura Hayward, tax partner at Evelyn Partners, said: “Today’s fresh data release from HMRC shows the extent to which the Treasury is continuing to benefit from ever increasing IHT receipts. What’s more, given inflationary growth of asset values coupled with frozen allowances, as things stand, the cash cow that is IHT looks set to be very lucrative for the Treasury for many years to come. 

“Families should use today’s update from HMRC as a reminder to take a close look at their tax planning with a professional adviser to ensure they don’t pay more tax than they need to. Trusts can also be a powerful tool with many different uses when it comes to IHT planning, depending on the family’s requirements and circumstances. Life insurance can also be set up in a trust, so that the money can be accessed immediately to pay an inheritance tax bill.”

She added: “Families can also consider other areas, such as using tax-efficient investments, which could benefit from Business Relief and reduce or eliminate IHT bills.”