IHT receipts rise to £2.6bn

IHT receipts for April to July 2023 amounted to £2.6bn, which is £0.2bn higher than the same period a year earlier, according to new data published today by HMRC.

The report stated that receipts in June 2023 were the highest monthly total on record and attributed it to the possible effects from the rise in interest rates that HMRC is obliged to charge on overdue tax bills following the recent increases in the Bank of England base rate.

According to the monthly receipts patterns in each financial year since 2020 to 2021, lower receipts in April and May 2020 were due to a temporary issue where HMRC were unable to accept cheques for payment of IHT due to COVID-19, which was resolved, hence the peak in June 2020 receipts

March 2022 saw higher receipts because of a combination of higher volumes of wealth transfers following recent IHT-liable deaths, recent rises in asset values, and the government’s March 2021 and Autumn 2022 decisions to maintain the IHT tax free thresholds at their 2020 to 2021 levels up to and including 2027 to 2028.

On the whole, HMRC said that the higher receipts in June 2022, November 2022 and June 2023 can be attributed to a small number of higher-value payments than usual.

Laura Hayward, tax partner at Evelyn Partners, said: “The speculation about scrapping IHT as part of a Conservative manifesto pledge at the next general election has quietened down somewhat while many in Westminster are on their summer holidays. But what isn’t taking a break are the year-on-year rises in IHT receipts that are continuing to prove extremely lucrative for the Treasury, as today’s update from HMRC demonstrates.

“Inflationary growth of asset values coupled with frozen allowances* mean that an ever increasing number of people are being dragged into paying IHT which can leave the descendants of those who have passed away in a difficult position. Loved ones may need to sell family homes or take on more debt if they need to settle a large IHT bill.”

She added: “There is nothing to suggest that the year-on-year increases in IHT receipts will end anytime soon. In fact, the Office of Budget Responsibility has predicted that the amount collected from IHT receipts will grow from £7.2bn for this tax year to £8.4bn by 2007/28. Families may want to take professional tax planning advice to ensure they don’t pay more tax than they need to.

“Making gifts to family members can be one of the best places to start in reducing or eliminating an IHT bill. Gifts you make are generally not subject to IHT unless you die within seven years. There is also an annual gift allowance of up to £3,000 per tax year, and this will not be subject to IHT even if you do die within seven years. Setting up trusts can be a helpful means of passing on assets tax efficiently to the next generation because they help ensure that gifts are used in a responsible way. Trusts can only be accessed at a certain time or for a particular reason.”