Inheritance tax receipts for December 2022 totalled £545 million, up from £474 million in the same month a year ago. For the final quarter of the calendar year, the tax take hit £1.8 billion – the highest total on record and up from £1.4 billion last year.
Receipts for the current tax year to-date (April 2022-December 2022) reached £5.3 billion, which is £0.7 billion higher than through the same period a year earlier.
With three months of this year’s inheritance tax still to be collected and reported, the 2022/23 haul looks comfortably on course to beat last year’s total of £6.1 billion – and set yet another record for receipts.
Commenting on today’s data, Stephen Lowe, group communications director at retirement specialist Just Group, said: “The Treasury looks set to collect a record amount of cash from inheritance tax this financial year and forecasts predict nearly £8 billion a year will be raised from the levy by 2027/28.
“The combination of the freeze on the nil-rate band and rising property prices continues to funnel more inheritance tax into government coffers, especially in regions where house prices are far higher than the rest of the country.
“Substantially more estates pay inheritance tax in London and the South East and a recent Just Group FOI found that the property accounted for 50% of the wealth in London estates paying IHT compared to 32% for the rest of the UK.
“Further significant house price rises through the pandemic are likely to have tipped many more estates over the inheritance tax threshold, perhaps without the homeowners even realising.
“It is yet another reminder for people of the importance of regularly assessing the value of their estate which includes getting an up-to-date valuation of any owned property.
“Professional, regulated advice can also help people work out the total value of their estate, calculate how much tax they may be likely to owe and understand what options they have to manage that tax bill.”
John Glencross, CEO and Co-Founder of Calculus, said: “Inheritance tax (IHT) receipts will continue to remain high given the freezing of IHT thresholds for two more years. One area that advisers and investors could consider helping mitigate against IHT is by investing in an Enterprise Investment Scheme (EIS), as full inheritance tax relief is provided, for the life of the investment once the shares have been held for two years.
“At Calculus, our Knowledge Intensive EIS Fund provides investors with the opportunity to not only benefit from the diversified, strong performing and tax efficient nature of its products, but to also support innovative UK companies with a societal purpose and impact with at least 80% of the fund’s capital invested into businesses carrying out research and development to create new intellectual property.”
Andrew Aldridge, Partner at Deepbridge Capital, said: “Given the Chancellor’s freezing of IHT thresholds for a further two years and inflation remaining high, we anticipate that HMRC receipts will continue to rise in the near term. It is vital in 2023 for investors and financial advisers to engage in prudent financial planning to enable many individuals in or approaching retirement to mitigate this tax on their estate providing some financial peace of mind. Our recent research suggested that Business Relief investments have become an increasingly common tool used by financial advisers and we expect this demand to continue to grow.”
Richard Bate, partner and IHT expert at national law firm Weightmans, said: “As IHT receipts rise, the taxman is putting inheritance affairs under increased scrutiny. Families need to be incredibly diligent when it comes to assessing and reporting any inheritance tax they might owe to HMRC. Getting it wrong can lead to hefty penalties.
“In our experience, mistakes often arise simply not only because of how complex the assessment and reporting process can be, but because the level of detail and investigation that is required not properly appreciated.
For example, people may not realise the need to analyse seven years’ worth of banks statements to identify possible gifts made by the deceased or to obtain a formal market valuation of property, house contents and investments when tax is due, relying instead on approximations and internet searches. A Revenue investigation is stressful and time consuming and executors can face personal penalties if HMRC can show that an inheritance tax account has been submitted without reasonable diligence.
“It’s essential that families seek the support of a solicitor where they are at all unsure. Getting the right help, early, can prevent potentially big headaches down the line.”
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Darran Harrison, Wealth Planner at Kingswood, said: “The latest figures published from HMRC today have revealed inheritance tax (IHT) receipts from April 2022 to December 2022 are £5.3 billion, which is £700 million higher than in the same period a year earlier.
“A recent study found more estates pay inheritance tax in London and the South East and that property accounted for around 50% of the wealth in London estates paying IHT compared to 32% for the rest of the UK. Further still, the average house price in London is 71% higher than the rest of the UK which could be a contributing factor.
“The increase also shows the effects of ‘fiscal drag’, where allowances and reliefs have not increased in line with rising prices. With inflation continuing to rise, this factor will play a big role in future tax revenues. The nil rate band and residence nil rate band are set to be frozen until at least April 2026, resulting in many families receiving increased IHT bills as more estates are brought into scope.
“With the impact of freezing tax bands and allowances the Chancellor is increasing tax receipts without changing tax rates. The effect is magnified in periods of high inflation, resulting in the buying power of a family being significantly reduced over time.”
