IHT receipts surge to £4.3bn in first half of 2024, £400m higher than last year

Ahead of next weeks’ Autumn Budget

Inheritance tax (IHT) receipts have hit £4.3bn in the six months from April to September 2024, according to figures published by HM Revenue and Customs (HMRC).

This is £400m higher than the same period in the previous tax year and continues the upward trajectory over the last two decades.

Higher receipts from March 2022 are expected to be due to a combination of higher volumes of wealth transfers following recent IHT-liable deaths, recent rises in asset values, and the government’s March 2021 and Autumn 2022 decisions to maintain the IHT tax free thresholds at their 2020 to 2021 levels up to and including 2027 to 2028.

The higher receipts in June 2022, November 2022, June 2023, and October 2023 can be attributed to a small number of higher-value payments than usual.

Wealth Club investment manager Nicholas Hyett said: “Inheritance tax is an absolute cash cow for His Majesty’s Revenue and Customs, which is why it remains in the spotlight ahead of next weeks’ Autumn Budget. No one knows what changes will be announced, but most agree there will be some attempt to milk more revenue from estates.

“The great thing about inheritance tax from the government’s point of view is that it’s complicated, with a whole host of rules that could be tweaked to boost the tax take. Tweaks could include changes to Business Relief, including on AIM shares, making pensions subject to inheritance tax and extending the time period needed to make gifts inheritance tax free.

“Business Relief helps family-owned businesses pass between generations as well as encouraging investors to invest in young, fast-growing businesses – whether that’s on AIM or through starts ups qualifying for EIS. Removing the relief would decimate smaller, family-owned businesses, while also making backing smaller companies less attractive.

“Removing the IHT free status of pensions will also be damaging. It is in any government’s interest that people can support themselves in retirement. Constantly changing the rules puts people off saving in a pension, whether they are rich or poor.”

Just Group group communications director Stephen Lowe said: “Halfway through the tax year, the continued increase in IHT receipts comes as no surprise. With thresholds frozen and property prices still climbing, more estates are being drawn into the scope of IHT.

“Ahead of the much-anticipated Autumn Budget, rumours abound that inheritance tax could be under review as the government looks for ways to boost revenue and fill its fiscal ‘black hole’. Whether or not changes are introduced, it’s vital that people understand where their estate stands in relation to the current IHT threshold.”

Quilter Cheviot technical consultant David Denton said: “Labour’s first budget is now just over a week away, and rumours around potential changes to IHT have been rife. IHT is a highly emotive issue, and it has been ripe for reform and simplification for many years given it is full of impenetrable and irrelevant details in need of review.

“However, reports that the government could make a quick tax grab by removing the complex but valuable residence nil rate band, or by extending the current seven-year rule to ten years, could face significant backlash. Similarly, the reform or even closure of several tax reliefs such as agricultural and business relief, which were touted when the first rumours of potential budget changes broke, could have the knock-on effect of AIM shares losing their inheritance tax break – a move that would seem entirely at odds with a government looking to drive growth and investment in UK assets.”

Sahar Nazir (Professional Adviser)

Retirement Professionals IHT receipts surge to £4.3bn in first half of 2024, £400m higher than last year