HMRC raises £2.9bn in IHT from April to August 2022
According to investment service Wealth Club, its calculations suggest the average bill could increase to just over £266k this tax year
HMRC raised £2.9bn in inheritance tax receipts between April and the end of August 2022, which is a £300m increase from the same period last year, according to new figures released today.
Under UK law, inheritance tax is paid at 40% on assets valued above a certain threshold. However, currently only around one in every 25 estates pay the tax, and a combination of inflation and decades of house price increases are said to be taking more and more estates above the threshold.
According to investment service Wealth Club, its calculations suggest the average bill could increase to just over £266k this tax year. This would be a 23% increase from the £216k average paid just two years ago.
Alex Davies, CEO and founder of Wealth Club, said: “This is being fuelled by soaring house prices and years of frozen allowances, made worse by recent double digit inflation. The new PM has stated that she would review inheritance tax rules if she came into power, but it’s hard to imagine IHT is top of the to-do list for Friday’s mini budget, especially with so many more pressing issues at hand.
“The tax is a vital cash cow for the Treasury, and the extra £300 million collected in the last four months is certainly needed. Nonetheless, there are a few reforms the government might consider. Scrapping the tax altogether seems unlikely, but cutting the 40% rate or increasing the threshold which has been frozen since 2010 at £325k would all be welcome changes.”
He added: “The good news is that there are already several perfectly legitimate and sensible ways to reduce the amount of inheritance tax your family might have to pay on your death. It is for this reason that inheritance tax in some circles is referred to as a ‘voluntary tax’.”
Julia Rosenbloom, tax partner at Evelyn Partners, added: “This latest reported year-on-year rise for IHT receipts will be welcomed by the Treasury given it is under pressure to pay for Liz Truss’s pledges to reverse the recent national insurance increase and the scheduled corporation taxes increases, as well as fund the energy plan announced earlier this month.
“While the outlook for IHT is uncertain, more families are already being pushed into its scope given frozen allowances and rising house prices, even before any possible changes are made by the new Truss administration.”
She added: “By considering tax planning strategies, such as making gifts to family members or investing tax-efficiently, there are a number of legitimate ways families may be able to reduce or eliminate their IHT bills.”
