HMRC rakes in extra £400million in inheritance tax but there’s an ‘easy way’ to cut bill
The Treasury is on course to collect record receipts of £7.54billion from inheritance tax this year
GETTY
Inheritance tax receipts (IHT) surged to £6.8 billion between April 2023 and February 2024, £0.4 billion higher than the same period last year.
The Treasury is on course to collect record receipts of £7.54billion from inheritance tax this year, which would beat the previous all-time high of £7.1billion collected in 2022/23.
The figures are predicted to keep increasing as the allowance thresholds remain frozen until 2027/2028.
As property prices increase, more and more families are getting caught out by the nil rate band and forced to pay thousands.
Stephen Lowe, group communications director at retirement specialist Just Group said: “Despite speculation that the Chancellor would tinker with inheritance tax in the Spring Budget, it was left alone – and with public finances so tight, it is little wonder.
“Frozen thresholds and the increase in property values have dragged more estates into paying the tax and we would encourage people to assess the entire value of their estate, including an up-to-date valuation of their property, and familiarise themselves with the inheritance tax rules.”
The figures are predicted to keep increasing as the allowance thresholds remain frozen until 2027/2028
GETTY
How to reduce your inheritance tax bill
Amid rising inheritance tax receipts, many may wonder if they will be affected, and whether they can reduce potential tax bills.
Around one in 25 deaths results in an IHT liability, according to AJ Bell.
But with IHT at a rate of 40 per cent, it can eat into the money people leave behind, so taking action now “is essential”.
Laura Suter, director of personal finance at AJ Bell explained that while inheritance tax is the most hated tax, it’s “actually very easy to reduce the IHT bill” on one’s estate.
This can be done by utilising gifting allowances, which mean people can move money out of their estate for IHT purposes.
Everyone can give away up to £3,000 a year without it being considered for IHT, but they can also carry this forward if they didn’t use the allowance last year. This limit is per individual, so a couple can double it.
Ms Suter continued: “On top of that there are extra allowances if certain people get married: £5,000 for a child getting married, £2,500 for a grandchild or great-grandchild and £1,000 for anyone else.
“You can also gift up to £250 per person each year free of IHT. These gifts can be cash, investments, jewellery, property or other assets.
“The most generous gifting allowance is ‘gifts from regular income’, which allows you to make an unlimited amount of regular payments to another person but it must come from your regular income, not from assets or investments, and it must be affordable from your regular income.”
As end of the tax year approaches, Britons are encouraged to lock in some gifts as soon as possible before there is a reset each new tax year.
With no mention of inheritance tax the Spring Budget, families will pay an extra £53,000 on average when a loved one passes away, new figures show.
Inheritance tax is usually paid at a rate of 40 per cent for estates over £325,000, which is known as the nil rate band.
This has not changed since 2009 despite average house prices surging. Under government plans, the nil-rate band will remain frozen until at least 2028.
However, if the allowance increased every year with inflation since 2017, then in 2028 it would be worth £458,931, figures have shown.
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As a result families will fork out an extra £53,000 on average in 2028-29 alone, according to analysis of official figures carried out by accountancy firm RSM.
Camilla Taylor, of RSM, said: “An inheritance tax bill can often come as an unwelcome surprise to families."
Ms Taylor explains families "may have incorrectly assumed that inheritance tax only applies to the wealthiest in society”.
She continued: "As the nil-rate band remains frozen, thousands more families are likely to be pulled into the inheritance tax net.
"It begs the question as to whether the current inheritance tax regime is targeting the right people.”
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