Inheritance Tax receipts rise 15%
Between April 2022 and February 2023, HMRC recorded Inheritance Tax (IHT) receipts of £6.4 billion - an increase of £0.9 billion compared to the same period a year earlier - and the Office for Budget Responsibility has forecasted that receipts for 2022/23 will hit £6.7 billion.
It seems that the trajectory for IHT receipts over the coming years is likely to be very much upwards.
IHT has, until recent times, tended to have been considered a tax on the wealthiest, but that is no longer the case.
The combination of the ongoing freeze to the IHT thresholds, and the fairly sustained rise in property prices, is pushing more and more people into the scope of IHT; especially in regions where house prices are higher than the rest of the country.
The zero-rated IHT 'nil-rate band' has been £325,000 since 2009/10, and is set to remain at that level until 2027/28, and the more recently introduced residence nil-rate band is now also frozen at £175,000 until 2027/28. The UK House Price Index for January 2023 revealed the average property value in England to be £310,159, with the average value in the South East of England being £398,368.
With this increased tax take caused by the freezing of thresholds and the rises in house prices, the importance of regularly assessing the value of your estate, reviewing your will, and taking advice cannot be over emphasised.
Where it seems likely that an estate will be liable to IHT, advice should be sought to ensure that all available tax exemptions and reliefs are considered and captured where relevant, and that legitimate planning is considered to remove assets from the scope of IHT.
If this is not done during a person's lifetime, all may not be lost as it is still possible to vary a person's will (or intestacy) within two years of their death, which may allow post-death planning to be carried out.
However, a word of caution: the tax rules around gifting of property and associated planning are complex, and so legal advice should be taken which is tailored to an individual's specific circumstances.
