Inheritance tax receipts hit £3.5bn this year
One in every 25 estates pay inheritance tax, yet according to Wealth Club, the freeze on inheritance tax thresholds is ‘bringing more and more into the taxman's sights’
Inheritance tax receipts have hit £3.5bn in the six months to September 2022, £400 more than in the same period last year, which marks the continuation of an upward trend, according to Wealth Club.
Inheritance tax (IHT) of 40% is usually chargeable if assets exceed a certain threshold, after deducting any liabilities, exemptions and reliefs. The threshold has been £325,000 per single person since 6 April 2009, and will stay frozen at this level up to and including 2025-26.
There is an additional transferable main residence nil rate band of £175,000 available when passing the family home down to children or other direct descendants. Any unused threshold may be transferred to a surviving spouse or civil partner.
One in every 25 estates pay inheritance tax, yet according to Wealth Club, the freeze on inheritance tax thresholds, paired with inflation and decades of house price increases is “bringing more and more into the taxman’s sights”.
Wealth Club also suggested the average inheritance tax bill could increase to just over £266,000 in the current tax year, a 27% increase from the £209,000 average paid three years ago.
Alex Davies, CEO and founder of Wealth Club, said: “The government’s inheritance tax take seems to be increasing relentlessly, largely thanks to the steady increase in house prices in recent years pushing more family in the IHT danger zone. With all that’s going on in Downing Street, we can’t see that there is any chance that this money-spinner will be reduced or abolished any time soon.
“The OBR has already predicted that next year IHT will bring in £6.7bn and while only 1 in 25 estates currently pay this tax, for those that are picking up the tab, we think the average bill could reach £266,000 for the current tax year.”
He added: “The increase is being driven by soaring house prices and years of frozen allowances. Rampant inflation will magnify the effect of freezing allowances in the years ahead. Without some review of the rules, more and more families are going to find themselves hit by death duties they might not expect.
“The good news is that with some careful planning there are lots of perfectly legitimate ways you can eliminate or keep IHT bills to the minimum, so more of your wealth is passed on to your loved ones rather than being syphoned off by the taxman.”
