Inheritance Tax Receipts Reach Record High
The latest figures from HM Revenue and Customs (HMRC) show that inheritance tax receipts have reached a record high of £7.5 billion for the period between March 2023 and April 2024. This represents a £400 million increase compared to the same period in the previous tax year and continues an upward trend observed over the past two decades. Projections suggest that inheritance tax receipts could exceed £9.5 billion before the end of the decade.
While only 4% of estates are currently subject to inheritance tax, the Institute for Fiscal Studies (IFS) estimates that the proportion of deaths resulting in inheritance tax payments is expected to rise to over 7% by 2032-33. This translates to a significant increase in the number of people affected by inheritance tax. The IFS predicts that by 2032-33, one in eight people will have inheritance tax due either on their death or their spouse or civil partner's death.
For those who are liable to pay inheritance tax, Wealth Club calculations suggest that the average bill could reach £243,000 in the 2023/24 tax year. This represents a substantial increase of 13.3% compared to the average of £214,000 paid just three years ago. Additionally, the number of estates paying inheritance tax has risen by 15.9%.
"It may only be paid by a small minority of taxpayers, but for those picking up the death tax tab, the bills are eye-watering. And it's not just the wealthiest families that are being dragged over the threshold for inheritance tax. Increasing house prices, coupled with threshold freezes, mean more families are getting caught out by this most hated of taxes despite their quality of living remaining unchanged."
In recent months, there have been growing calls for the government to abolish inheritance tax altogether or at least introduce significant reforms. Evidence from other countries, such as Sweden and Australia, suggests that inheritance tax reform could have positive consequences beyond simply making politicians more popular with voters. Abolishing inheritance tax has been linked with a decline in the number of businesses relocating overseas and an increase in the number of wealthy individuals choosing to move to the country.