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Inheritance Tax receipts for April 2024 to July 2024 are £2.8 billion, which is £0.2 billion higher than the same period last year, HM Revenue and Customs revealed today.
Annual rises in inheritance tax paid are pretty much a given these days, as property and financial market assets continuing to rise in value, and IHT allowances remain frozen. Inevitably, as more estates find they exceed the nil-rate bands, and more assets in each liable estate become taxable, the IHT take creeps upwards. With no complaints on that from the Treasury, there is little incentive for the Chancellor to halt this trend.
Rather, there will be a temptation to capitalise on it to fill gaps in the public finances.
Senior Labour figures have made it clear they think certain reliefs – specifically business and agriculture property relief – are too generous and think-tanks seem keen that defined benefit pension pots are brought into the remit of IHT. We already know that the new Government will crack down on ‘abuse’ of reliefs and that can easily lead to a review of the reliefs themselves.
So Rachel Reeves’ first big fiscal statement on 30 October will be closely watched for any review into IHT reliefs, or suggestion that pension pots could be deemed part of a deceased’s estate.
IHT is also likely to be a growth area for Treasury revenues in the coming years for another reason. With the baby boomer generation now hitting their sixties and seventies, some of that generation’s accumulated wealth is being passed on to children and grandchildren, and getting taxed on the way. The ‘great wealth transfer’ is also underway because many of the older, asset-rich generations are making lifetime gifts to their families. As the wave of inheritance is set to grow over the next 30 years to a transfer of £5.5trillion, the temptation for successive Governments will be to tap into it to plug gaps in the public finances.
The Office for Budget Responsibility forecasts that the share of deaths resulting in the payment of inheritance tax will rise to 6.3 per cent by 2028–29, the highest level since the 1970s. That proportion was as low as 2.7 per cent in 2009/10. Revenue from inheritance tax and its predecessors has increased over time in real terms, from around £2billion in 1980/81, to £7.5billion in 2023/24, and will reach almost £9billion by 2028/29 (all amounts in 23/24 prices).
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