HM Revenue and Customs today revealed that inheritance tax receipts for April 2024 to May 2024 are £1.4 billion, which is £0.2 billion higher than the same period last year. That is an annual increase of 16.6 per cent.
Laura Hayward, Tax Partner at professional services and wealth management firm Evelyn Partners, says:
Inheritance tax receipts seem to be booming in this tax year, and after just two months revenues are well on the way to a record total for the 2024/25 tax year. The 16.6 per cent surge suggests that the next Government will be taking significantly more from IHT whatever it intends to do with the tax or the reliefs around it.
IHT has turned into a spectre at the electoral feast which no one really wants to mention by name, never mind grapple with. Labour named it once in their manifesto, confirming its pledge to end the use of offshore trusts, which is a matter affecting mainly non-doms.
While the Conservatives promised to retain business-related reliefs, they made no other pledge on IHT, with not one mention of the word ‘inheritance’ in their manifesto – quite a climbdown from the situation less than a year ago when the possible abolition of IHT was being touted for the 2023 Autumn Statement.
Rishi Sunak’s farmyard offensive this week played on fears that remain among agricultural and other family businesses that Labour could target these reliefs, given previous pronouncements. He claimed Labour had a ‘secret plan’ to increase taxes on farmers because it had not explicitly ruled out abolishing an exemption from IHT for agricultural properties.
Even if a new Government is shy of making transparent and potentially unpopular decisions to tax the passing on of wealth more harshly, then fiscal drag is doing a similar job behind the scenes anyway. With both property and financial market assets continuing to surge in value, there is no prospect of the trend abating for more estates, and more assets in each liable estate, being dragged over the frozen thresholds at which IHT kicks in.
The Office for Budget Responsibility forecasts that the share of deaths resulting in the payment of inheritance tax will rise to 6.3 per cent by 2028–29, the highest level since the 1970s. That proportion was as low as 2.7 per cent in 2009/10. Revenue from inheritance tax and its predecessors has increased over time in real terms, from around £2billion in 1980/81, to £7.5billion in 2023/24, and will reach almost £9billion by 2028/29 (all amounts in 23/24 prices).
The haul for the Treasury from IHT is likely to escalate in the coming years due to a particular demographic bump. As the wealthy baby boomer generation dies off in the next couple of decades, there will be a massive transfer of wealth. Research shows that the older generations have as much as £2.6trillion of equity tied up in their homes.”[1] IFS March 2024
[2] Savills: https://www.savills.co.uk/insight-and-opinion/savills-news/346692-0/housing-wealth-held-by-over-65s-hits-record-high-of-over-%C2%A32.6-trillion–according-to-research-by-savills Also, Knight Frank: https://www.knightfrank.com/research/article/2024-02-28-how-will-millennials-spend-us90-trillion
