HM Revenue & Customs (HMRC) revealed there has been a £500m ($591m, €576m) increase in inheritance tax (IHT) receipts in the first six months of the 2022-23 financial year.
Between April and October 2022, the taxman collected £4.1bn – 14% more than the same period last year.
IHT receipts have been hitting record highs virtually any time HMRC published its figures over the last 18 months or so, and the trend is bound to continue following chancellor Jeremy Hunt’s announcement that IHT nil-rate bands will remain frozen for an additional two years until 2027-28.
Julia Rosenbloom, tax partner at Evelyn Partners, said: “Coming fast on the heels of Hunt’s Autumn Statement, if anyone needed a reminder of the stealthy growth of inheritance tax, it’s here in the form of fresh data showing rising receipts from death duties.
“The latest 14% annual rise in IHT revenues for the Treasury shows how effective the allowances freeze – which has been in place since 2009 in the case of the main £325,000 nil-rate band – already is in drawing more assets into the IHT net.
“This process will in all probability continue apace up to 2028 as fiscal drag does its work under the radar. Even with a moderation in property and investment asset prices, estates that come to probate will be sitting on years or decades of growth, thanks in large part to the hard work and prudence of the post-war generations.
“The Office for Budget Responsibility expects IHT receipts to soar from £6.1bn in the 2021/22 tax year to £7.8bn in 2027/28 – an increase of 28%.”
Total u-turn
Alex Davies, chief executive and founder of Wealth Club, added: “There has been a total U-turn on inheritance tax over the last few months. From Liz Truss raising the hopes of the nation with a cut back in September, and now Jeremy Hunt announcing the extension of the freeze until 2028. This is another stealth tax, and the case of the boiling frog is apt.
“The Treasury hopes by leaving rates and allowances unchanged, inflation can do the hard work of turning the temperature up on taxpayers without them noticing.
“Contrary to what many think, inheritance tax doesn’t just affect the super-rich. It will be the thousands of hardworking families that will bear the brunt. Rampant inflation, soaring house prices and years of frozen allowances will magnify the tax take in the years ahead. More and more families are going to find themselves hit by death duties they might not expected or planned for.”
