Inheritance tax receipts hit £1.2bn

More people are being hit by inheritance tax as rising property prices translates to more estates becoming liable for the tax.

Older couple looking at laptop
(Image credit: Getty Images)

Inheritance tax (IHT) receipts totalled £1.2bn in April and May — the first two months of the current 2023/24 tax year – according to government data published today.

The figure is £100m more than the figure recorded in the same period last year.

The new numbers come amid the Office of Budget Responsibility’s forecasts that £38bn will be raised over the next five years from IHT, with receipts rising to a hefty £8.4bn in the 2027/28 tax year as fiscal drag pulls more people into the IHT net. 

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It comes amid new data that shows that a significant number of high net worth individuals are failing to plan ahead, with 28% of those with investable assets of £250,000 not putting measures in place to deal with IHT, according to the latest Saltus Wealth Index Report.

Inheritance tax bands frozen 

Chancellor Jeremy Hunt confirmed the threshold for inheritance tax (IHT) would be frozen until April 2028 in his Autumn Statement last year, despite double-digit inflation. 

IHT has become “a real hot potato” in recent weeks, says Laura Hayward from wealth management firm Evelyn Partners, with pressure on the government to get rid of the tax.

“However, it’s important to remember that no decisions have been announced as of yet and while this debate bubbles away more families are being dragged into paying IHT,” she said.

Hayward added: “Today’s fresh data release from HMRC shows the extent to which the Treasury is continuing to benefit from ever increasing IHT receipts. What’s more, given inflationary growth of asset values coupled with frozen allowances, as things stand the cash cow that is IHT looks set to be very lucrative for the Treasury for many years to come.” 

How can you minimise your inheritance tax bill?

“Families should use this update from HMRC as a reminder to take a close look at their tax planning with a professional adviser to ensure they don’t pay more tax than they need to,” said Hayward.

Increasing numbers of families are: around 48% more in the past decade are deliberately using Potentially Exempt Transfers (PETs). These are gifts of unlimited value that become IHT-free if the person lives seven years after giving them. Around 6,610 families gave away money this way to reduce their IHT liability in 2019/20, up from the 4,500 families in 2009/10.

  • Make use of the annual gift allowance of up to £3,000 per tax year - this will not be subject to IHT even if you do die within seven years. And if you didn’t use the allowance last year, you can combine it and pass on £6,000. Wedding gifts of £5,000 to children and £2,500 to grandchildren are also protected from IHT.
  • Make regular gifts from surplus income of unlimited value - as long as they’re from excess income and don’t affect your personal standard of living.
  • Set up a trust. Many people choose to make gifts in trust so that the money can only be accessed at a certain time or for a particular reason. Life insurance can also be set up in a trust, so that the money can be accessed immediately to pay an inheritance tax bill.
  • Donate to charity. If you donate at least 10% of your estate to charity, you could benefit from a 4% discount on your IHT rate, lowering it from 40% to 36%. 

You can read more about how to reduce your IHT bill.

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Katie Binns

Katie is deputy editor of Times Money Mentor and long-time contributor to the Sunday Times where she started on the Irish desk in 2012 and spent 10 years covering news, culture, travel, personal finance and celebrity interviews. 

Her investigative work on financial abuse has examined the response of banks, the Financial Ombudsman and the child maintenance service to victims, and resulted in a number of debt and mortgage prisoners being set free - and a nomination for Best Finance Story of the Year at the Headline Money awards in 2021 and 2022. 

Katie was also shortlisted for Freelance Journalist of the Year at the Headline Money awards in 2022, 2023 and 2024 and won Personal Finance Journalist of the Year at The British Bank Awards 2022.