The first half of the 2023/23 financial year saw HM Revenue & Customs (HMRC) collect £3.9bn in inheritance tax (IHT) receipts, marking an 11% increase from the £3.5bn of the same period in the previous year. This trajectory suggests the Treasury is on pace for its highest ever annual collection.
Despite the Office for Budget Responsibility’s (OBR) forecast that IHT would raise £7.2bn this financial year, current figures hint at a likely surpassing of this estimate. The OBR also projects IHT to reach up to £8.4bn by 2027/28.
Recent research from Just Group has spotlighted a significant gap in retirees’ understanding of the current IHT thresholds and rules. This is concerning, especially with an anticipated increase in the number of estates that will be subject to the tax in the upcoming years.
Stephen Lowe, group communications director at Just Group, said: “We are now halfway through the financial year and already inheritance tax looks set to deliver another record haul for the Treasury, with the current tax take far higher than at the same point last year, and looking likely to exceed the OBR’s full-year estimates.”
He further added: “Inheritance tax may turn out to be the government’s magic porridge pot, as the freeze on thresholds until 2028 combined with the 30% increase in property prices over the past six years push increasing numbers of estates into paying the tax.
“Our research finds that a worrying number of retired people don’t have a firm grasp of the inheritance tax rules which could leave many families with a nasty surprise. The majority (59%) of retirees over 55 said they don’t know what the threshold is for the value of an estate to pay inheritance tax and a further 50% of this age group don’t have a clear understanding of the rules.
“What seems to be an ever-increasing value of IHT receipts should act as a warning for people to remember to assess the entire value of their estate and for homeowners this must include an up-to-date valuation of their 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.”
