- The IHT for the period was £400 million higher than at the same point a year earlier
- Chancellor Jeremy Hunt is under pressure over next month’s budget
The Treasury collected £6.3 billion in inheritance tax revenue from April 2023 to January 2024, new data from HM Revenue & Customs shows.
Inheritance taxes for the period were £400 million higher than at the same point a year earlier.
The Treasury is on track to receive record inheritance tax revenues of around £7.6 billion in the current fiscal year, up from a record high of £7.1 billion last year, according to an analysis by Evelyn Partners.
Chancellor Jeremy Hunt is under pressure to boost the economy in next month’s budget, with some calling for the abolition of inheritance tax.
In the run-up to last year’s autumn statement, rumors circulated that Hunt would reform or scrap the inheritance tax, but no changes materialized.
Raising: The Treasury made £6.3 billion in inheritance tax revenue from April 2023 to January 2024
On Wednesday, the Treasury Department said higher inheritance tax revenues in June 2022, November 2022, June 2023 and October 2023 could be attributed to “a small number of higher-than-normal value payments.”
In June 2023, HMRC data showed that surviving relatives paid £1.2 billion in inheritance tax in just eight weeks.
A freeze on exemption levels and, in many cases, higher property prices are contributing to an increase in the number of households subject to inheritance tax.
The zero rate band, The rate at which an estate does not pay IHT has remained at £325,000, drawing an ever-growing number of people into its web.
This zero rate band has been in place since 2010 and Hunt has extended its freeze until 2028.
It is possible that people use the ‘residential zero rate band’ to pass on a main residence to their children.
Under this rule, the allowance will increase by £175,000, meaning parents or grandparents can each pass on £500,000 to direct descendants before inheritance tax kicks in.
What’s next? Chancellor Jeremy Hunt will announce the new budget on March 6
Despised by many, inheritance tax 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.
Laura Hayward, tax partner at Evelyn Partners, said: ‘While a relatively small number of large estates are typically responsible for the lion’s share of annual inheritance tax revenue, this is supplemented by thousands of more modest inheritances.’
She added: ‘Small property falls like we have seen over the past year will do little to break this trend. And even though the effect of Covid-19 on mortality, which at one point increased total inheritance tax revenues, must now have virtually played out, inheritance tax receipts continue to rise.’
On whether Hunt could change inheritance tax rules in next month’s Budget, Hayward said: ‘Whether this is due to plugging leaks at the Treasury, or a change of heart at No. 10 and No. 11, the Budget rumor mill has gone silent on the subject of inheritance tax.
‘Despite being paid by a small proportion of estates, IHT is unpopular and has attracted attention as one of the taxes the Chancellor would like to cut during the Spring Budget, in a final roll of the fiscal dice before the actual election battle begins.’
She added: “Like inheritance tax A reduction would have little immediate impact on the financial situation of households. It is perhaps more likely that a promise on inheritance tax will be in the Conservative manifesto than in the budget – especially as this could appeal to and motivate some of the party’s voting core. ‘
Nicholas Hyett, investment manager at Wealth Club, said: “The government appears to be backtracking on possible tax cuts in the March budget.
‘And with inheritance tax being an ever-growing source of revenue, you can see why the Chancellor might find it difficult to cut this most unpopular of taxes. Any deficit would mean higher taxes or lower spending elsewhere.”