Data for HM Revenue and Customs showed inheritance tax receipts rose to £4.3bn in April to September 2024, a £400mn increase compared to the same period last year, as rumours swirl about changes to the tax in the upcoming Budget.
The figures, published today (October 22), show IHT has continued its strong upward trajectory over the past few years.
This is perhaps why it is rumoured chancellor Rachel Reeves has it in her sights for Budget as she looks to fill a £22bn hole in finances.
According to reports last week, the government is planning to increase the amount of money it raises in IHT with changes to exemptions.
Under current rules, pensions can be left free of IHT and Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said the government could remove this exemption altogether or place a limit on it.
David Denton, technical consultant at Quilter Cheviot, said IHT is a highly emotive issue and it has been ripe for reform and simplification for many years given it is full of “impenetrable and irrelevant details in need of review”.
He added: “However, reports that the government could make a quick tax grab by removing the complex but valuable residence nil rate band, or by extending the current seven year rule to 10 years, could face significant backlash.
“Similarly, the reform or even closure of several tax reliefs such as agricultural and business relief, which were touted when the first rumours of potential budget changes broke, could have the knock-on effect of Aim shares losing their inheritance tax break - a move that would seem entirely at odds with a government looking to drive growth and investment in UK assets.
“Historically, inheritance tax has been viewed as a tax on the wealthy, but this is simply no longer the case. IHT is one of the most hated taxes in Britain and can be incredibly polarising given the rich can often avoid it by employing expertise to help them navigate the complexities of the tax and the available reliefs, while those without such resource can be disadvantaged.”
Capital gains tax
The figures also showed income tax, capital gains tax and national insurance contribution receipts for April 2024 to September 2024 were £226.8bn, which is £6.2bn higher than the same period last year.
CGT receipts for the three months July to September this year were 16.3 per cent higher than the same period of 2024.
The chancellor also reportedly has CGT in her sights, with reports having suggested Reeves may be urged to start charging capital gains tax on businesses and second homes after their owners die, removing the existing tax-free uplift on death.
Andrew Tully, technical services director at Nucleus said: “While CGT is not individually specified within these figures, and the majority is paid in January as part of self-assessment, anecdotal evidence suggests more people are disposing of assets and realising gains in advance of the Budget on 30 October. CGT receipts are therefore likely to increase sharply this year.”
