IHT revenue on track for ‘another record-breaking year’
The Treasury is on track for another record-breaking year of revenues from inheritance tax (IHT) as receipts for April to September hit £4.4bn, which is £100m higher than the same period last year.
The increase represents an increase of 2.3 per cent, according to analysis from Evelyn Partners.
Evelyn Partners head of estate planning Ian Dyall said with the nil-rate band frozen at £325,000 since 2009 and the residence nil-rate band static at £175,000, “fiscal drag is quietly pulling thousands more families into the IHT net as asset values increase year-by-year”.
Dyall said the crackdown on agricultural and business relief (APR/BPR) alongside making unused pensions liable for IHT from 202y would “compound the effect”.
The Office for Budget Responsibility forecasts receipts will exceed £9bn by 2026, and potentially £14bn by 2030, Evelyn said.
“Chancellor Rachel Reeves has signaled that higher taxes on the wealthy will be ‘part of the story’ in her Autumn Statement on 26 November, as she seeks to plug a £30bn fiscal gap. If reports are correct that Ms Reeves is considering softening the APR/BPR crackdown for farms, she could well look elsewhere around IHT to prop up the tax take,” said Dyall.
“Possibilities include a crackdown on gifting, which could take the form of a lifetime gifting cap replacing the current unlimited gifting rule under the seven-year exemption, or extending the seven-year rule out to ten or more years.
“The combination of unspent pension assets becoming subject to IHT, fears over possible restrictions to pension tax-free cash, and speculation that gifting rules could be tightened up, has caused some families to hastily withdraw pension cash and start giving it away.”
Earlier this week, farming minister Angela Eagle ruled out APR and BPR changes despite rumours to the contrary.
Just Group director Stephen Lowe said: “IHT continues to prove a treasure trove for the chancellor. Rising asset prices, frozen thresholds and a tightening of the exemption regime are all combining to drive ever-growing receipts.
“The Treasury now looks set to collect a fifth consecutive record annual haul. With further reforms that were announced at last Autumn’s Budget yet to be implemented, we can expect this trend to continue and grow.
“Anyone who is uncertain or concerned that their estate may be subject to IHT should get an up-to-date valuation of their estate, including a recent assessment of their property wealth.
Estate planning is complex and difficult – especially with tinkering to the rules – and many families who wish to manage their estate efficiently will benefit from professional financial advice.”
Dyall added: “As Rachel Reeves prepares her statement, IHT and estate planning more widely is not just prudent, but urgent.”
Wesleyan Financial Services specialist financial adviser Jonathan Halberda said: “We’re hearing from a wider range of clients than ever – business owners, teachers, senior NHS staff – all deeply worried about what might be announced, and how quickly it would take effect.
“With rumours already circulating, such as changes to gifting, some are considering rushing to pass on wealth to loved ones or even withdrawing pension savings early. But panic planning rarely pays. While the anxiety is understandable, these moves can trigger unexpected tax bills or cause lasting damage to your long-term financial security that can be difficult, if not impossible, to undo.
“The smartest move now isn’t to panic, but to prepare. By seeking expert advice early, families can protect their wealth, keep their options open, and be ready to act with confidence when the Chancellor delivers the Budget.”
Jenna Brown Professional Adviser