Inheritance tax receipts have jumped again in the wake of unpopular changes to the IHT rules being announced the Budget.
HMRC has gathered in £5bn of IHT in the 2024/25 tax year so far, a jump of £500m on the same point the previous year.
The news comes following Budget announcements that pension pots will be pulled into IHT from 2027, thresholds have been frozen until 2030, and some of the relief on farms being passed on will be cut, the latter of which prompted a protest in London last weekend.
The record annual IHT take last tax year of £7.5bn now looks very likely to be beaten comfortably in 2024/25.
Alex Davies, CEO and founder of Wealth Club, said: “Inheritance tax was already an absolute cash cow for the government. The extreme changes announced in last month’s Budget which badly affect farmers, business owners, pension policyholders and investors, mean these figures are only going to increase over the coming years.
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“We believe all the changes to inheritance tax made in the Budget are extremely short sighted,” he continued. “Firstly, the tax burden is already at its highest in 70 years and growth is very low. More tax is likely to stifle growth further.
“Secondly these changes have given those affected no time to plan. It’s very much a case of “one day, that’s your money, the next day, it’s not”; a sentiment which is hardly going to encourage people to invest for the future whether that’s in their own business or in a savings vehicle such as a pension.
Rachael Griffin, tax and financial planning expert at Quilter, added: “This consistent upward trend underscores the government’s rationale for freezing the IHT threshold until 2030. However, incorporating pensions into the taxable estate from April 2027 will turbo charge this data.”
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“Farmers are also likely to start to bolster these figures as Agricultural Property Relief (APR) is made less generous.”
Jonathan Halberda, specialist financial adviser at Wesleyan Financial Services, said: “Inheritance tax was one of the more contentious revenue-raising measures announced in the recent Budget. By leaving the current £325,000 threshold unchanged until 2030, fiscal drag means IHT will inevitably continue to generate more cash for Government coffers, as we have seen in today’s data.
“From April 2027, inherited pensions will also be included, which by the Government’s own estimate will mean an extra 10,500 estates will have to pay.”
