Inheritance tax receipts hit new record of £7.5bn for 2023/24 tax year

by | Apr 23, 2024

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HM Revenue & Customs data today revealed that a record amount of £7.5billion in Inheritance Tax was paid to the Treasury in the 2023/24 tax year. 

Total receipts for April 2023 to March 2024 were £0.4billion greater than the all-time high of £7.1billion in 2022/23, a rise of 5.6 per cent.

Laura Hayward, Tax Partner at professional services and wealth management firm Evelyn Partners, comments: “This record IHT haul for the Treasury is hardly surprising given the quite purposeful freezing of the tax-free allowance since as far back as 2009. The average UK house price alone has increased by approximately 82.7 per cent since then.

 
 

“With no end to the freeze in nil-rate bands in sight there will be an escalation in IHT liabilities, if rules remain the same – not least because there is a massive transfer of wealth in the offing in the next couple of decades. Research shows that the older generations have as much as £2.6trillion of equity tied up in their homes, which the next generation or the one after are set to inherit.

“The Office for Budget Responsibility itself noted last month that IHT receipts are set to hit £9.7billion in 2028/29, which will be 0.30 per cent of GDP – twice the 0.15 per cent it was in 2009, when nominal receipts totalled £2.4billion. This is ‘mainly due to rises in asset prices… The rise also reflects significant fiscal drag as the IHT threshold has remained at £325,000 since 2009’. 

“Even without an exceptional transfer of wealth, more estates and more assets in each liable estate are being dragged over the threshold at which IHT kicks in as the value of financial assets and property increases. The modest property downturn of the last year or so, which missed some parts of the UK entirely, seems be over – so with the residential nil-rate band also frozen at £175,000, the trend of families or individuals with modest levels of wealth mostly held in property being subject to this 40% tax will continue. 

 
 

“Against this background, the crackdown on IHT exemptions suggested by the IFS last week would be an unwelcome hit to bereaved families. The IFS points towards ‘loopholes’ like business property relief that could potentially raise £2billion for the Treasury if ‘closed’ – but one person’s loophole is another’s legitimate exemption.[4] 

“It isn’t the so-called boomer generation, wealthy or otherwise, who will foot the IHT bill on their estates – it’s their potentially struggling children and grandchildren who could be parted from a big chunk of the hard-earned family savings. Any future government tempted to fill gaps in the public finances by increasing the IHT burden further will have to reckon with the deep-seated aversion that most households have towards the imposition of death duties.” 

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