Inheritance tax receipts came in 7.5% higher at £5.7bn between April and December compared to the same period a year ago, and is on course for another record-breaking year.
The levy rose by £400m over the nine-month period, according to the latest HMRC data, as tax changes and higher house prices pushed up the charge.
Just Group communications director Stephen Lowe says: “We are now three-quarters of the way through the 2023-24 financial year and it is evident that the Chancellor [Jeremy Hunt] can once again bank on record-busting Inheritance tax receipts for a third successive year.
“At the current rate of collection, inheritance tax will raise around £7.6bn for the Treasury in this financial year, far surpassing [fiscal watchdog] the Office for Budget Responsibility’s forecast of £7.2bn as well as last year’s all-time high of £7.1bn.
“Freezing the thresholds has dragged more households into paying inheritance tax especially when combined with the property price rises of the last five years or so.”
Evelyn Partners tax partner Laura Hayward adds: “Inheritance tax is harvesting more in revenue than was ever forecast as rising house prices and growth in investment assets have boosted the value of estates over the last couple of decades.
“This has drawn more estates, and more assets in each liable estate, over the threshold at which inheritance tax kicks in, which has been frozen at £325,000 since April 2009.
“Modest property downturns as we have seen in the last year or so will do little to dent this trend.
“In recent years there has also been a Covid effect on mortality which has further increased the overall inheritance tax take.”
Hargreaves Lansdown head of retirement analysis Helen Morrissey says that a cut in the levy, paid by 4% of estates, may be the Chancellor’s sights as he prepares for the Spring Budget on 6 March.
Morrissey points out: “Reported government plans to axe inheritance tax at the last Autumn Statement were widely criticised, but with a mixture of frozen thresholds and historic house price growth pulling more people into the net, we may well see plans to reform this tax made a feature of March’s Budget.
“Increasing thresholds and gifting allowances that haven’t been touched for years could help some families from falling into the net and would likely prove more popular than a decision to scrap it completely.
“For the sake of simplification, it also makes sense to do away with the separate nil rate band for property and roll it all into one.”
Evelyn Partners’ Hayward adds: “Speculation has focused on a cut to the 40% rate, as it did before the Autumn Statement, but a raising of the nil-rate band would do more to protect families with more modest estates who are being drawn into paying inheritance tax.
“Property and investments tend to rise in value over the long-term so if nothing is changed, more of households’ carefully saved assets will surge above the nil-rate band — which would now stand at £489,700 had it risen with inflation since April 2009.”
