IHT hits the mainstream

Recent data from HM Revenue & Customs (HMRC) has shown that Inheritance Tax (IHT) receipts for the 2022–23 tax year totalled ￡7.1bn, up ￡1bn from the previous tax year. With receipts consistently rising, this significant uplift can be attributed in part to 'a combination of the recent rises in asset values and the government’s decision to maintain the IHT nil rate band thresholds at their 2020 to 2021 levels up to and including 2025 to 2026,’ according to HMRC.

Over the next five years, IHT is expected to bring in ￡38bn for the Treasury, as detailed in the Spring Budget. This means annual receipts should exceed ￡8bn by 2027-28, with 6.7% of deaths expected to trigger an IHT charge, versus 3.76% of UK deaths in 2019-20.

Previously regarded as a tax on the wealthy, record receipts have prompted suggestions that the tax has now become mainstream, with elevated house prices and frozen thresholds having an impact despite the main residence nil-rate band introduced in 2017.

The good news…

Expert planning can help you legitimately mitigate IHT, so you can pass on assets to your family as you’d intended. Depending on your unique circumstances, there are different strategies you can implement such as considering placing assets into trust, making use of exemptions, making gifts during your lifetime, and thinking about leaving something to charity. With reliefs and exemptions on gifts to consider and the interaction with other taxes, IHT is complex.

With many more estates likely to be subject to IHT over the coming years, taking expert advice has never been so important.