Families pay £1.2bn in inheritance tax in eight weeks
The amount of estate tax raised in April and May this year rose 9.1 per cent year on year to £1.2 billion, new figures from HM Revenue & Customs show.
With this trajectory in mind, IHT revenue looks set to rise to a new all-time high of around £7.7 billion this financial year, which some experts say is above previous forecasts.
In March, the Office for Budget Responsibility said £38bn would be raised from IHT over the next five years, adding that the annual figure would rise to £7.8bn by 2026/7 and £8.4bn by 2027 /8.
Frozen: Jeremy Hunt has frozen the zero estate tax rate until 2028
A freeze in exemption levels and, in many cases, higher real estate prices help increase the number of households within the scope of IHT.
While the housing market remains volatile, new figures from the ONS also revealed today that UK property prices rose 3.5 per cent to £286,000 in the year to April. Growth has slowed but remains in place.
In the last financial year, money pouring into the Treasury reached a record £7.1bn amid higher property values.
The zero rate band, the rate at which an estate pays no IHT, has remained at £325,000, drawing an ever-growing number of people to its web.
This zero-rate band has been in effect since 2010 and Chancellor Jeremey Hunt has extended the freeze until 2028.
However, it is possible that people use the ‘zero residence rate bracket’ to pass on a principal residence to their children. Under this rule, the allowance is increased by £175,000, meaning that parents or grandparents can each pass on £500,000 to direct descendants before IHT starts.
> Ten tips to legally avoid inheritance tax
Loathed by many, IHT is often seen as a broader strategy of “tax drag,” where tax thresholds and allowances fail to keep pace with inflation or wage growth, resulting in more tax being paid.
“As things stand, the cash cow IHT looks very lucrative for the Treasury in the coming years,” said Laura Hayward, tax partner at Evelyn Partners.
She added: ‘Families should use this update from HMRC as a reminder to review their tax planning with a professional adviser to ensure they are not paying more tax than they need to.’
![Families pay £1.2bn in inheritance tax in eight weeks 2 Taxation: A chart showing all of the HMRC's tax receipts for April and May 2023](https://nybreaking.com/wp-content/uploads/2023/06/1687422107_460_Families-pay-12bn-in-inheritance-tax-in-eight-weeks.jpg)
Taxation: A chart showing all of the HMRC’s tax receipts for April and May 2023
Echoing this sentiment, Stephen Lowe, a pensions expert at Just Group, said, “Inheritance tax seems to be the gift the Chancellor keeps giving.”
Jon Sullivan, an IHT advisory policy advisor at Wesleyan, said: “More and more families are paying a tax that has historically been only for the very wealthy.
“HMRC’s own figures show that the number of estates paying IHT increased by 24 per cent between tax years 2021-22 and 2022-23 – a staggering figure.”
Earlier this month, however, findings from cross-party think tank Demos claimed that the findings showed that doing away with estate taxes may not be a vote-winning strategy, given that three-quarters of people support some form of the levy.
According to the survey conducted for Demos, 55 percent of people initially said they thought inheritances should be tax-free in general, but the public was more supportive when asked about taxes on specific amounts of inheritance.
Voters were more likely to favor taxing higher inheritances, including a second home, financial assets or unearned wealth, rather than savings accrued through wages.
About 75 per cent supported taxes on some amount of inheritance, with the median response setting the threshold at £300,000, just below the current threshold for inheritance tax of £325,000, and well below the £1 million threshold where most estates actually start at paying the tax.
As the IHT Treasury bill rises, many households are facing serious delays from the government’s Probate Service.
Drastic staff cuts, particularly at senior levels in the Probate Service, are causing increasing delays for bereaved families trying to unlock estates, legal experts say.
The Probate Service shrank by more than a third from 188 to 123 staff in the three years to 2021/22, according to Justice Department figures obtained in a freedom of information request by law firm Nockolds.
It was also revealed earlier this month that HMRC is cutting its taxpayer phone line until September, in a move it says frees up staff to help callers with urgent questions.
Since 12 June, HMRC has been attempting to forward self-assessment questions from the helpline to the department’s digital services, including the online guidance, digital assistant and web chat.
It claims it will help 350 advisors answer urgent calls on other lines and answer customer questions.
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