Inheritance tax receipts have hit a record-breaking £7.5 billion in the year to April 2024, according to the latest HMRC data. This marks a £400 million increase from the same period in the previous year, continuing the upward trend fuelled by years of soaring house prices and frozen tax allowances.
While just 4% of estates reportedly paid the IHT in 2020/21, the Institute of Fiscal Studies (IFS) predicts the figure will rise to 7% by 2032/33.
IHT is the tax charged on the value of an estate (property and valuables) owned by someone who has passed away. Currently, the single person’s inheritance tax threshold is £325,000. So, tax is only ever paid if the estate value exceeds this figure, after which a 40% tax on the remaining amount is applied.
Recent research shows most people want this “unfair tax” cut in half or scrapped altogether. In a Saltus survey of 2,000 Britons with investable assets of over £250,000, just 4% of respondents said 40% is a fair rate for IHT; 90% think it should be cut down to 20%, while 6% said it should be scrapped altogether. A further 48% of retired respondents think it is “the most unfair tax in Britain”.
Megan Jenkins, partner at Saltus said that there are “already many options” for people who want to pass on their wealth as efficiently as possible. She explained: “These include gifting and giving away cash during their lifetimes – and our report shows around three-quarters of HNWIs are currently financially supporting their families through the cost-of-living crisis – as well as trust funds, charitable giving and funeral plans.”
However, she noted: “There are a number of common IHT mistakes that people are making.”
