HM Revenue & Customs (HMRC) collected a total of £500m ($660m, €600m) in inheritance tax (IHT) in the month of April 2022.
The UK taxman said that this was a £10m increase from the same period a year ago and the highest sum collected in the first month of the tax year in the last five years.
With the UK battling one of the worst cost-of-living crises in decades, inflation at a 40-year high, soaring house prices, and IHT thresholds frozen until at least April 2026, the figures are bound to keep growing.
Analysis by the Office for Budget Responsibility (OBR) in March 2022 revealed that HMRC is forecast to collect around £37bn in inheritance tax over the next five years, with the yearly sum growing year-on-year.
Julia Rosenbloom, tax partner at Tilney Smith & Williamson, said: “The need for families to take professional advice and give careful consideration to their tax planning has never been more important.
“We don’t know what, if any, changes will be made to IHT in the future, but already many people are facing higher IHT bills given that the nil rate band and residence nil rate band has been frozen until at least April 2026. Rising property prices are pushing more families into scope for IHT.
“By taking action sooner, rather than later, families may be able to reduce or eliminate their IHT bills by considering tax planning strategies such as investing tax-efficiently or making gifts to family members. During these uncertain economic times, receiving such gifts may be particularly welcome for some.”
Plan ‘early and carefully’
Alex Davies, chief executive and founder of Wealth Club, agrees with Rosenbloom as he claims IHT to be “the gift that keeps on giving – to the treasury at least”.
“With the pace of property price growth still at nearly 10%, it’s no wonder so many more households are being pushed over the IHT threshold,” he added. “It’s now believed that the average family impacted by inheritance tax will face an average tax bill of £200,000.
“There are perfectly legal and legitimate ways to reduce your inheritance liability with a little careful and early tax planning. Writing a Will so that you are forced to consider and address the issues your estate might face, and keeping it regularly updated to reflect any changes in heart or circumstances should be a priority for everyone, married or not.”
But Liz Ritchie, partner at Mazars, warned that inheritance tax planning should not be looked at once and “ticked off the to-do list”.
“To make sure you are making the most of your allowances, they must be reviewed regularly with your tax adviser. It is also important to work with a financial adviser, one that you trust and feel has your best interests at heart, to make sure you are using allowances efficiently and that you feel confident about your financial situation.”