Record Inheritance tax collected
Thursday 27th July 2023
Katy Baxter
The first quarter of the 2023/24 financial year saw £2bn collected by the Treasury in Inheritance Tax (IHT).
The latest figures follow a record-breaking year in 2022/23, which saw a total of £7.1bn raised in IHT. The latest quarter has raised 11% more than the same period last year, which exceeds the previous peak of £1.8bn in Q3 2022/23.
In June 2023 tax receipts recorded an income of £795m, which marks a monthly all-time high.
The Office for Budget Responsibility (OBR) has estimated that IHT will raise £7.2bn in the 2023/24 financial year, with as much as £8.4bn by 2027/28. However, there has been recent media speculation that the Government is considering scrapping the tax ahead of the next general election to curry favour with the voting public. It remains to be seen whether this will actually happen and in light of the increasing value of IHT liabilities, probably not.
Rising Inheritance Tax receipts should act as a warning for everyone to remember to assess the entire value of their estate, including an up-to-date valuation of their property. Professional advice can help people work out the total value of their estate, calculate how much tax their loved ones may be likely to owe and understand what options they have to manage that tax bill.
There are several ways of reducing or eliminating IHT bills, such as making gifts to family members. Gifts you make are generally not subject to IHT unless you die within seven years. There is also an annual gift allowance of up to £3,000 per tax year, and this will not be subject to IHT even if you do die within seven years. If you are interested to find out more about IHT exemptions, please do contact us.
Many will want to ensure that their gifts are used responsibly, which can be a particular concern when large amounts of money are passed down to younger members of the family. Trusts can be a powerful IHT planning tool to help combat these concerns. Choosing to make gifts via Trust means that money can only be accessed at a certain time or for a particular reason. Life insurance can also be set up in a Trust, so that the money can be accessed immediately to help pay an IHT bill.
At Montgomery Estate Planning we specialise in helping families pass their wealth to the next generation in the most tax efficient way. We are able to advise on the complexities involved in this area of Estate Planning and have all the tools and experience at our disposal to help clients achieve their objectives. We would urge people to take action now and so if you would like an initial conversation to see how we can help, please do get in touch. Don't give away more of your hard earned money to the government than you really have to.