Inheritance tax (IHT) receipts have continued to climb, reaching a record £7.5bn for the 2023/24 tax year.
Figures from HM Revenue and Customs revealed a £400m increase from the previous tax year in a continuation of the upward trend evident for two decades.
According to numbers from Wealth Club, IHT receipts are on track to hit £9.5bn before the end of the decade.
Only 4% of estates are currently liable to pay IHT, but the IFS estimates that the proportion is set to reach over 7% by 2032/33.
By this point in time one in eight people will have IHT due either on their death or their spouse or civil partner’s death, Wealth Club noted.
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Wealth Club calculations suggest the average bill could increase to £243,000 in the 2023/24 tax year, with over 31,000 families having to hand over part of their inheritance. This represents a 13.3% increase from the £214,000 average paid just three years ago and a 15.9% rise in the number of estates paying the tax.
Nicholas Hyett, investment manager at Wealth Club, said: “It may only be paid by a small minority of taxpayers, but for those picking up the death tax tab, the bills are eye watering.
“And it’s not just the wealthiest families that are being dragged over the threshold for inheritance tax. Increasing house prices, coupled with threshold freezes, mean more families are getting caught out by this most hated of taxes despite their quality of living remaining unchanged.”
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Nick Henshaw, head of intermediary distribution at Wesleyan, added: “It’s certainly true that ever more families can expect to be caught in the inheritance tax net as the value of their estates continues to grow and the £325,000 threshold remains frozen.
“Today’s data will be sharpening some clients’ minds to the threat they may face, and it’s an opportunity for advisers to once again show their value in helping them manage and mitigate IHT risk – whether that’s through avenues like trusts, or pension funding.
“It’s also an issue that is likely to remain on the political agenda. Whatever potential reform or changes are suggested in the months ahead, advisers will have an important role to play in helping clients cut through the noise ultimately keep their strategies, and focus, on likelihoods and the long-term view.”
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John Glencross, CEO and co-founder of Calculus, said: “IHT revenues continue to steadily rise due to the prolonged freeze on IHT thresholds until at least April 2028. March’s Spring Budget did not address IHT, therefore it is a financial planning issue that will not go away soon.
“One effective method to mitigate IHT for advisers and investors is through an Enterprise Investment Scheme fund. The EIS offers inheritance tax relief, contingent upon holding shares for at least two years and at the time of death.”
