Inheritance Tax receipts for April 2024 to February 2025 are £7.6 billion, which is £0.8 billion higher than the same period last year, HM Revenue & Customs revealed today.
Ian Dyall, Head of Estate Planning at wealth management firm Evelyn Partners, comments:
‘With one month of the financial year’s tax receipts to go, inheritance tax revenues are on course to exceed last year’s total by nearly 12%, driven by the engine of fiscal drag.
‘Property and investment assets continue to grow in money terms so that more modest estates in real terms are exceeding the frozen nil-rate bands, and those nil-rate bands start to look less meaningful for larger estates, protecting an ever-smaller proportion of them against IHT.
‘Further moves on taxation at next Wednesday’s Spring Statement are unlikely, not least because most of the tax measures announced at the autumn Budget have yet to take effect or be confirmed in law. Those eyeing the event nervously from an IHT point of view can probably relax – and even hasty decisions around drawing on pensions, being made after the Budget announcement that they will be included from April 2027 in IHT liabilities, are probably worth reviewing, preferably with professional help.
‘If the Chancellor is really backed into a fiscal corner, a slim possibility is that she will again extend the freeze on personal tax bands and thresholds from April 2028 – but the IHT NRBs are already frozen until April 2030 after the Budget, so even change there is unlikely.
‘However, it would not be surprising if the Chancellor announces a tax review or consultation or two, and the IHT gifting regime is one area where the cash-strapped Labour government could look to bring in more revenue. While such a process would be billed as a “simplification” of the gifting rules – which are admittedly confusing – the aim would be to block off some of the escape routes that estates look to when trying to mitigate a future IHT bill.
‘We have seen many clients quite sensibly increase gifting since as far back as the election – some simply setting the seven-year clock ticking for potentially exempt transfers with large one-off gifts, others using lesser-known methods like regular gifts out of surplus income.
‘Either way, as the trend is most definitely that many estates will face significantly higher IHT bills over the coming years, with possibly fewer ways to mitigate them, then the option of insuring against the liability is also growing in popularity. Since October we have already seen many more clients seeking whole of life cover aimed at covering a future IHT bill so their beneficiaries will not have to foot it, and we expect to see many more do this in the future as it is not yet a widely understood option – particularly among families who are not taking professional advice.’
