HMRC’s monthly update on tax receipts issued on 21 March 2023 shows yet another increase in the amount of Inheritance Tax (IHT) that has been paid and received. IHT is the tax that is payable on the value of an estate on death.
The amount of IHT paid to HMRC during the period from April 2022 to February 2023 was £6.4 billion which is £0.9 billion higher than in the same period the previous year.
HMRC say that they attribute some of the increase to “a small number of higher value payments than usual” but it is unlikely that this represents the whole £900 million increase.
Other factors such as:
- The increase in the value of assets in the preceding months and years such as rise in property prices; and
- The on-going failure of successive governments to increase the IHT thresholds (the nil rate band) which still remains at the 2009 level of £325,000; and
- The on-going failure of successive governments to increase the annual allowances for IHT in respect of lifetime gifts and transactions which still sit at the levels that they were set in 1982.
It is clear that IHT receipts are likely to continue to increase whilst the allowances and thresholds remain frozen. This means that the number of estates that are likely to pay IHT will continue to increase along with the amount of IHT that is actually paid to HMRC.
We therefore recommend:
- A regular review of Wills to ensure that these are drafted in the most tax efficient manner to make the best use of the allowances and reliefs that may be available.
- A regular review of lifetime IHT planning. Are there steps that you could take to reduce the size of your taxable estate and hence the IHT bill that will follow on your death.
The private client team at Stephens Scown is able to advise on IHT and the means in which it can be avoided or at least mitigated.