In the 2022/23 tax year, inheritance tax receipts reached an all-time high. The trend seems to continue this year too.
The government releases monthly data on tax receipts. In April, it showed that HMRC raised £7.1 billion through inheritance tax in 2022/23. Between 2013/14 and 2022/23, this represented a 108.3% increase in inheritance tax, which is quite substantial.
How much Inheritance Tax are people paying?
According to Professional Adviser, HM Treasury collected £1.2 billion in inheritance tax in the first eight weeks of the current tax year 2023/24. This is a 13% increase compared to the same period in the last financial year. The Office for National Statistics (ONS) predicts that inheritance tax will raise £7.2 billion by March 2024, indicating that new records might be set.
What is behind the increase?
Inflation, along with the freeze on the nil rate band and residence nil rate band until at least April 2028, plays a significant role in increasing inheritance tax receipts. During high inflation, this freeze can lead to a ‘stealth’ tax increase, pulling more estates into the inheritance tax bracket and raising additional tax from those already affected.
Do you know what I can do?
There are some strategies to mitigate inheritance tax. These include having an accurate and up-to-date will and using lifetime trust-based arrangements. With this approach, you transfer ownership of your assets to a trust while you are still alive. This could allow you to leave these assets as gifts for your beneficiaries without them being subject to inheritance tax.