Inheritance tax receipts hits £600 million in a month

Inheritance tax receipts hit £600 million in April 2023 according to data released by HMRC this morning. This is £100 million higher than in April of the previous tax year.

Years of house price increases, soaring inflation, and tax freezes believe pushed an increasing number of families that would not consider themselves to be wealthy above the threshold for inheritance tax.

There is a tax-free inheritance allowance called the nil-rate band that applies to everyone. Each person can pass on up to £325,000 of their estate without them having to pay any IHT. Anything above £325,000 could be subject to up to 40% inheritance tax. The nil-rate band has stayed at the same level since April 2009, even though inflation has slit the value of the relief by 32.8% over that time and the average house price has increased closely 85%.

Some homeowners can also benefit from a ‘residence nil-rate band’ of up to £175,000 on top of the nil-rate band. This, however, only applies when you pass on your main residence to a direct descendant. The ‘residence nil-rate band’ has been frozen at £175,000 since April 2020.

Alex Davies, CEO and Founder of Wealth Club said, “The 2023/24 tax year is looking likely to be yet another record-breaking year for inheritance tax. It really is a cash cow for HMRC.

“There are rumours inheritance tax slit could be slit in the race up to the next General election, with the government potentially increasing the threshold at which an estate becomes liable for inheritance tax.

“Alternatively, the government might consider a slit in the headline rate of tax. Either would be very welcome by the large numbers of affluent, but far from uber rich, households that are being hit by this most hated of taxes.

“But in some circles, inheritance tax is already called the voluntary tax because so much can be avoided or mitigated through government backed investment schemes and careful tax planning. Writing a will is a marvelous start. If you don’t your assets will be distributed according to intestacy rules and could be subject to IHT which could otherwise be avoided.”