The recent figures from HM Revenue and Customs (HMRC) indicate a significant increase in Inheritance Tax (IHT) receipts, totalling £4.3 billion for the first half of 2024.
- This marks an increase of £400 million compared to the same period last year, suggesting a persistent upward trend.
- Several factors contribute to this rise, including increased wealth transfers and stagnant IHT tax-free thresholds set by previous government decisions.
- The government’s decision to hold IHT thresholds at 2020 to 2021 levels until 2028 plays a crucial role in the current tax landscape.
- Asset value growth and a series of higher-value estate settlements also add to the burgeoning IHT receipts.
In a recent release, HMRC has reported a substantial increase in Inheritance Tax receipts, reaching £4.3 billion between April and September 2024. This figure reflects a notable rise of £400 million over the same period in the previous fiscal year. The growth forms part of a long-term trend that has seen IHT receipts consistently climbing over the past two decades.
A combination of factors is driving this upward movement in receipts. The volume of wealth transfers has increased significantly, a shift likely influenced by demographics and the unfortunate passing of individuals with considerable estates. Additionally, the government’s strategic choice to freeze IHT tax-free thresholds at the 2020 to 2021 levels until 2028 stands out as a policy decision impacting tax revenue.
The ramifications of this policy decision mean that more estates are now falling within the taxable bracket as inflation and asset value increases continue unabated. This situation is further exacerbated by the rise in property and investment values, which have escalated due to economic conditions.
Moreover, certain months, such as June 2022, November 2022, June 2023, and October 2023, saw particularly high receipts. This pattern can be attributed to the settlement of a small number of substantial estates, heavily influencing the overall figures reported by HMRC for this period.
The rise in IHT receipts underscores the interplay of policy decisions and economic factors impacting estate taxation.
