Inheritance Tax receipts for April 2024 to January 2025 are £7.0 billion, which is £0.7 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:
‘The inevitable monthly increase in inheritance tax receipts leaves little doubt that this will be another record tax year for IHT revenues as estates across the UK continue to grow in value and nil-rate bands remain frozen.
‘This inflation-led boost to the Treasury coffers will already be accounted for in the fiscal forecasts. Unfortunately for the taxpayer, despite this fiscal drag and the measures at the Budget which will bring pensions into IHT from 2027 and squeeze business and farm assets harder, inheritances might not be out of the woods yet.
‘Given the wide-ranging pressures on the public finances, with geo-political upheaval now prompting calls for greater defence spending, it might not be long before Rachel Reeves is again forced to seek new ways of boosting tax revenues. With the self-imposed limits on how she can do this, IHT remains one of the few ways the Chancellor can wriggle out of the fiscal strait-jacket.
‘Pension pots will not become liable to IHT until April 2027 and the combined business and agricultural property relief exemption will not be cut to £1m until April 2026. While it seems unlikely further tax changes will be announced at the spending review in late March, the next autumn Budget could well stir speculation if the Chancellor has to cast around for a few extra billion to balance the books.
‘One possibility is an overhaul of the gifting regime, as this would be a relatively easy way for the Treasury to extract a bit more from IHT without raising the headline rate or cutting the nil-rate bands. That could close off some of the options that families have been using to reduce their IHT liability, especially since the October Budget. We have seen many clients 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 gifts out of surplus income.
‘Either way, as the trend is most definitely that many estates will face significantly higher IHT bills, 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.’
About Evelyn Partners
We are a wealth management and professional services group, created following the merger of Tilney and Smith & Williamson in 2020. With £62.7 billion of assets under management (as at 30 September 2024) we are one the largest UK wealth managers and are also the seventh largest UK accountancy firm ranked by fee income (source: Accountancy Age 50+50 rankings, 2023).
We have a network of offices across 29 towns and cities in the UK, as well as the Republic of Ireland and the Channel Islands. Through our operating companies, the Group offers an extensive range of financial and professional services to individuals, family trusts, professional intermediaries, charities and businesses.
Our purpose is ‘to place the power of good advice into more hands’, and we are uniquely well-placed to support clients with both their personal financial affairs and their business interests. Our personal wealth management services include financial planning, investment management and advice, personal tax advice and, through Bestinvest, an award-winning online investment and coaching service for self-directed investors. For businesses, our wide range of services includes assurance and accounting, business tax advice, employee benefits, forensic advice, fund administration, fund governance, recovery and restructuring and transaction services.
For further information please visit: www.evelyn.com
