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Inheritance tax receipts on track for record high amid calls to slash rates
Treasury’s IHT income soars by £500m as Hunt faces growing pressure to reduce burden
The Treasury is on course to secure a record inheritance tax take this year as calls grow for the Chancellor to slash rates in Wednesday’s Autumn Statement.
Inheritance tax (IHT) receipts from April to October were £4.6bn, according to new data from HM Revenue & Customs, up £500m on the same period last year.
The 12pc rise means total IHT receipts for 2023/24 are on track to hit £7.8bn, surpassing last year’s record annual take of £7.1bn.
The Treasury’s IHT income has boomed after tax-free thresholds were frozen at their 2020/21 rate for seven years, rather than being adjusted in line with inflation.
At the same time, the pool of taxable cash has swelled as inherited wealth has grown faster than income. This is due to factors such as house price growth.
The figures come ahead of Jeremy Hunt’s Autumn Statement on Wednesday when he is expected to outline a series of tax cuts designed to boost economic growth.
This includes the possibility of reducing the IHT levy from 40pc to 20pc.
Stephen Lowe, of retirement specialist Just Group, said: “At the current rate of tax collection, inheritance tax will raise over £7.8bn for the Treasury.”
This will be £600m more than what the Office for Budget Responsibility (OBR) forecast in March.
As inherited wealth swells, an increasing number of people are being hit by inheritance tax charges.
The Institute for Fiscal Studies has predicted that 13pc of deaths will lead to an IHT bill by 2030, more than double the 7pc expected in the next few years.
Without any cuts to the rate, the OBR expects the Treasury will receive £8.4bn in IHT receipts by 2027-28.
However, Andrew Tully, director at Nucleus Advisors, said this forecast is likely to be surpassed based on the current trajectory.
Individuals have a £325,000 tax-free allowance on their inheritance, as well as an additional £175,000 nil-rate band for inherited residential property.
When combined, this means they can inherit up to £500,000 tax-free. Above this threshold, IHT is charged at 40pc.