HMRC Inheritance Tax takings increase to record high

The new figures show an increase of Inheritance Tax (IHT) of £700million compared with the same period a year ago.

This comes as a new poll carried out by Public First found that 55 per cent of those surveyed want to either reduce or completely eliminate inheritance tax.

While the poll suggested that many Brits are in favour of reducing or eliminating IHT altogether, there are many who would not support this idea.

Opponents took to Reddit to highlight the problems the country would face if this happened, with one user posting: "IHT is our main wealth tax and wealth inequality is one of our current biggest issues we’re facing. I can understand maybe for primary residences increasing the threshold but honestly for 2nd, 3rd homes etc I’d ramp it up."

Another added: "The only thing this poll really says is that 55% of respondents don’t know the IHT rules and that over 95% of the population will never be asked to pay an IHT charge."

The issue of farmers and Inheritance Tax was also raised: "I’m not in favour of getting rid of it. But can’t see why I should pay more on my estate than a farmer either."

What is Inheritance Tax?

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who has died.

There’s normally no Inheritance Tax to pay if either:

• the value of your estate is below the £325,000 threshold
• you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club

If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase to £500,000.

If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die.

From April 2027, proposed plans could see pensions lose their inheritance tax exemption, meaning they are counted in the overall pot.

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Andrew Zanelli, head of technical engagement at global investment company abrdn, says: "IHT receipts are still climbing. This trend is going to continue, and we’ll also see more people affected by the tax. The Office for Budget Responsibility predicts that one in ten estates will have IHT to pay by the end of the decade.  

“Nearly all the advisers I’ve been speaking to are being approached by their clients about IHT and a big driver is the plan to make pensions subject to IHT. We’re still waiting on the finer details around how this will happen, but we know the basic facts and the intention for this to be in place by 2027.

“What we’re hoping to be fixed before then is the very real risk of delays to the bereaved receiving their inheritance because of the new process. 

“This is a risk that has the potential to cause significant disruption and emotional distress at a very vulnerable time. We, and others, have suggested some alternatives, which we’re urging the government to take on board.”

Jeremy Clarkson has spoken out against farm inheritance tax reforms (Image: Ben Birchall)

Jonathan Halberda, Specialist Financial Adviser at Wesleyan Financial Services, adds: “Inheritance Tax (IHT) receipts are only going to keep rising, and more and more estates are likely to find themselves falling within its scope – especially when pensions become subject to IHT from April 2027.

 “Recently, I’ve been seeing an increasing number of people try to manage their IHT risk by making ‘DIY’ plans, which often involve gifting money to loved ones.

 “While these strategies can be effective, the IHT rules are complicated and people should be careful not to put themselves in a worse position by inadvertently falling foul of them.”