HMRC reveals inheritance tax receipts up £83m to £2.1bn
Speculation over how Labour will tackle Inheritance Tax (IHT) continues to abound, with take up again for the latest reported quarter.
IHT receipts hit £2.1bn for April 2024 to June 2024, representing an £83m increase on the same period the prior year, as per HMRC official figures.
It remains to be seen how Labour Prime Minister Keir Starmer and Chancellor Rachel Reeves will look to address the tax, but speculation remains rampant. Financial advice professionals will be awaiting the new government’s plans for IHT, which some have labelled a “stealth tax”, with bated breath.
The government has an “urgent task at hand” to simplify the IHT system, Abrdn head of savings policy Alastair Black said this morning (19 July).
“There has been much speculation that IHT is one of the taxes Labour may look at given its commitment to not raise other taxes,” Black said. “But this tax now affects more than just the super-rich with receipts continuing to rise.”
Given this, IHT may “not be the obvious place to go” for Labour, Black noted.
The Abrdn savings policy lead urged advisers to engage with both clients and their heirs to avoid losing assets and business over time.
“As Baby Boomers are set to shift £1tn in assets this decade, IHT receipts keep climbing,” Black said. “The frozen nil rate band and rising asset values are trapping more people in the tax’s web.”
NRB freeze impact
The nil rate band (NRB), currently frozen until 2028, sits at £325,000 and has done so since 2009. It is in addition to the residence nil- rate band (RNRB) that can provide an additional £175,000 cushion. The RNRB was phased in from 2017 onwards and is also held to a 2028 freeze.
“Frozen tax thresholds, which show no sign of thawing under Labour, have failed to keep up with inflation leading to a continuous spike in the IHT take,” pointed out Quilter Cheviot chartered financial planner Rosie Hooper.
IHT takes are expected by experts to rise as asset values increase.
“We don’t know yet what is planned for IHT in this Parliament, but we’d hope to see if reformed for the better,” said Wesleyan head of intermediary distribution Nick Henshaw. “It’s affecting far more people than it was ever designed to, and making the regime more streamlined and easier to engage with will only help more families plan for passing on their wealth.”
The Office for Budget Responsibility (OBR) has forecast that IHT will raise £7.5bn in the 2024/25 year, equivalent to 0.3% of national income. This could rise to £9.7bn by 2028/29.
Last March, prior to the July general election that saw Labour propelled into power, Professional Adviser reported that IHT receipts were up £400m for April 2023 to February 2024, netting the government £6.8bn.
Jen Frost Professional Adviser