Inheritance Tax Receipts Reach Record High
The latest figures from HM Revenue and Customs (HMRC) reveal a significant increase in inheritance tax receipts. From March 2023 to April 2024, the total amount collected reached £7.5 billion, marking the highest value ever recorded. This represents a £400 million increase compared to the same period in the previous tax year, continuing an upward trend observed over the past two decades. Projections suggest that inheritance tax receipts could even surpass £9.5 billion before the end of the decade.
While only 4% of estates currently face inheritance tax liability, the Institute for Fiscal Studies (IFS) estimates that this proportion is set to rise to over 7% by 2032-33. This translates to a larger number of people being affected by inheritance tax. The IFS predicts that by 2032-33, one in eight individuals will have inheritance tax due either on their death or the death of their spouse or civil partner.
For those who do incur inheritance tax liability, the average bill is expected to increase to £243,000 in the 2023/24 tax year, according to calculations by Wealth Club. This translates to over 31,000 families having to pay a portion of their inheritance to the taxman. This represents a substantial increase of 13.3% compared to the average of £214,000 paid just three years ago, and a 15.9% rise in the number of estates subject to the tax.
"Although inheritance tax is only paid by a small minority of taxpayers, the bills for those affected are substantial. And it's not just the wealthiest families that are being impacted. Rising house prices coupled with frozen thresholds mean more families are being caught out by this unpopular tax, despite their living standards remaining unchanged."
In recent months, the government has faced growing calls to abolish inheritance tax altogether or at least introduce significant reforms. Evidence from countries like Sweden and Australia suggests that such reforms could have positive outcomes beyond simply making politicians more popular with voters. Abolishing inheritance tax has been linked to a decrease in businesses relocating overseas and an increase in wealthy individuals choosing to move to the country.