The newest figures from HM Income and Customs present that inheritance tax receipts elevated to £3.2 billion within the 5 months from April 2023 to August 2023.
It is a £300 million improve from the identical interval within the earlier 12 months, and continues the upwards pattern over the past decade.
One in each 25 estates pay inheritance tax, however the freeze on inheritance tax thresholds, a long time of home value will increase and excessive inflation are bringing increasingly estates above the edge.
For these which are paying this dying tax, Wealth Membership calculations recommend the typical invoice might improve to only over £234,000 this 2023/24 tax 12 months. It is a 11% improve from the £214,000 common paid simply three years in the past.
Inheritance tax is usually paid at a charge of 40% over sure thresholds, though you may go on cash IHT free to your partner or civil accomplice, who will then additionally inherit your allowance for once they go away. The primary threshold is the nil-rate band and applies to the overwhelming majority of individuals within the UK, enabling as much as £325,000 of an property to be handed on with out having to pay any IHT. That has been unchanged since 2009. Nevertheless, there’s additionally a Residence Nil Fee band price £175,000 which permits most individuals to go on a household house extra tax effectively to direct descendants, though this tapers for estates over £2 million and isn’t obtainable in any respect for estates over £2.35 million.
Nicholas Hyett, Funding Supervisor at Wealth Membership stated: “The Treasury raked in an additional £300 million from inheritance tax from April to August 2023, in comparison with the identical interval a 12 months earlier. This improve is being fuelled by years of hovering home costs and frozen allowances.
Whereas simply 4% of estates pay inheritance tax for the time being, given the nil-rate and residence nil-rate bands have been frozen for years folks with extra common incomes and common worth properties will find yourself getting caught out by this most hated of taxes. Furthermore, with the federal government’s pockets below stress from all angles, there’s unlikely to be any respite quickly.
The excellent news is that there are nonetheless numerous reliable methods to go on cash freed from inheritance tax, which is why inheritance tax is known as a ‘voluntary tax’ in some circles.”
Paul Barham, Accomplice at Mazars commented: “The IHT nil charge freeze has been price its weight in gold for the treasury boosting the federal government’s coffers by £3.2 billion in April to August. This, together with excessive asset values throughout property and investments, means HMRC is properly on its strategy to one other file IHT 12 months. Though, the way forward for IHT is below the highlight with rumours that it may very well be scrapped altogether come 2024, you may’t plan your funds on hypothesis and other people ought to have a look at ways in which they’ll cut back their potential IHT legal responsibility. Maximising private reward allowances, and doing so early, having a sound will and utilizing clear expression of needs paperwork are steps which are typically neglected. The newest figures are a well timed reminder to pay these some consideration.”