Inheritance tax: Bill for Britain’s ‘most hated tax’ hits record
According to the latest figures, HMRC collected a record £6.3bn in inheritance tax over the nine months to the end of December.
Inheritance tax receipts hit £6.3bn from 5 April to 31 December 2024, an 11 per cent increase on the £5.7bn received in the same period in the previous year.
Receipts totalled £620m in December alone, an increase of 13 per cent on the £547m collected in December 2023.
More estates set to pay inheritance tax
Currently, just four per cent of estates are liable for inheritance tax, but government estimates suggest that this will increase to 10 per cent by 2030.
Inheritance tax is applied at a flat rate of 40 per cent on estates worth over £325,000, but the system includes many loopholes, meaning the effective rate is often much lower.
In last October’s Budget, Chancellor Rachel Reeves took action to close some of the key loopholes. Under the changes, inherited pension pots will be subjected to inheritance tax from April 2027 and farms will have to pay the tax for the first time.
The Office for Budget Responsibility has estimated that policy changes announced at the Budget will add £2.5bn in inheritance tax receipts by 2029-30.
Commenting on the new figures, Nicholas Hyett, investment manager at Wealth Club, stated: “Inheritance tax continues to be something of a golden goose for HMRC – with a tax take that seems to rise inexorably.”
“It may only affect a small number of estates at present, but that number is growing all the time – suggesting ‘Britain’s most hated tax’ is only set to become more unpopular,” he added.
While Simon Martin, head of UK technical services at Utmost Wealth Solutions added: ““We are seeing a significant increase in clients seeking professional advice around inheritance tax to ensure they fully understand the implications of the reforms.”
“There are complexities such as the tapering of the residence nil rate band for estates of a certain value which can potentially add to inheritance tax liabilities,” he concluded.
Changes to boost HMRC’s coffers
Recently, an exclusive polling conducted for Morning Wire revealed that the majority of people think that inheritance tax should be lowered.
While on Wednesday, a new report by MPs warned that HMRC is “degrading its own services as a matter of policy” and damaging the public’s confidence.
Shaun Moore, tax and financial planning expert at Quilter: “With inheritance tax thresholds frozen until 2030, more families are being pulled into the scope of IHT, and this trend shows no signs of slowing.
“Add to that the significant changes coming in April 2027, when pensions will be drawn into taxable estates, and the government looks set to cash in on an ever-expanding pool of taxpayers.
“Farming families, too, could face tougher times as reductions to Agricultural Property Relief start to bite, potentially forcing some to make difficult decisions about the future of their farms. Meanwhile, tweaks to Business Relief and AIM share rules are also likely to keep boosting HMRC’s coffers in the years ahead.”