27th June 2023
HMRC’s monthly bulletin for June 2023 reported that Inheritance Tax (IHT) receipts for April and May increased by £100mn in the same period last tax year to £1.2bn. This is following record IHT receipts for the 2022/23 tax year of £7.1bn, which again was an increase on the previous year of £1bn.
The Government’s decision to freeze the IHT threshold has led to more families being dragged into the IHT net. The IHT threshold of £325,000 has not increased since 2009, while the average UK house price increased by more than 80% between 2009 and early 2023. The announcement in the 2022 Autumn Statement to freeze the IHT threshold until April 2028, will see the Government collect billions in extra tax that would not be possible if the nil rate band had increased with inflation.
While there have been calls for the abolition of IHT, it is unlikely that the Treasury would be willing to forfeit £7bn a year in receipts, which helps to fund our public services, without a viable alternative. We may see some IHT reforms, but scrapping the tax altogether would leave a sizeable hole in the Treasury budget, presumably needing to be filled by increases in other taxes.
In our opinion, given the current state of the UK economy, IHT is here to stay. Therefore, lifetime planning remains key if you wish to minimise the tax you pay to the Treasury and maximise the family wealth you pass on to the next generation.
IHT planning can include lifetime giving, charitable giving, gifting surplus income or setting up a family trust or investment company. Maximising IHT allowances and reliefs also plays a part in reducing your exposure.
Our IHT specialists are on hand to assist you with your estate planning and provide you with bespoke solutions to minimise your potential IHT exposure.