Inheritance tax drags in 7.2% more from estates as IMF suggests raising death duties

HM Revenue and Customs figures today revealed that Inheritance Tax receipts for April 2024 were £700million, which is £85million or 7.2 per cent higher than the same month last year.

Laura Hayward, Tax Partner at professional services and wealth management firm Evelyn Partners, says:

“The IMF this week suggested that the Chancellor should raise inheritance tax, by broadening its base, in order to shore up the weakness that its staff diagnose in the UK’s public finances.

"Today’s tax receipt figures, coming on the back of the 2023/24 data that showed a 5.6 per cent rise in the annual IHT take compared to 2022/23, show that fiscal drag is doing that job for IHT already by stealth.

“The IMF’s IHT-raising message is unlikely to gain much traction in the current Government: the last time IHT was making policy news was when speculation had it being cut or even abolished at the Autumn  Statement. But a hawkish sentiment on IHT could find more receptive ears should there be a change of Government.

“Even if thresholds and rates just remain frozen, the IHT net will be cast much wider and draw in families across the UK with fairly modest levels of wealth in real terms.

“The Office for Budget Responsibility forecasts that the share of deaths resulting in the payment of inheritance tax will rise to 6.3 per cent by 2028–29, the highest level since the 1970s. That proportion was as low as 2.7 per cent in 2009/10.

"Revenue from inheritance tax and its predecessors has increased over time in real terms, from around £2billion in 1980/81, to £7.5billion in 2023/24, and will reach almost £9billion by 2028/29 (all amounts in 23/24 prices).[1]

“The haul for the Treasury from IHT is likely to escalate in the coming years due to a particular demographic bump. As the wealthy baby boomer generation dies off in the next couple of decades, there will be a massive transfer of wealth.

"Research shows that the older generations have as much as £2.6trillion of equity tied up in their homes.”[2]

[1] IFS March 2024

[2] Savills:

https://www.savills.co.uk/insight-and-opinion/savills-news/346692-0/housing-wealth-held-by-over-65s-hits-record-high-of-over-%C2%A32.6-trillion--according-to-research-by-savills

Also, Knight Frank:

https://www.knightfrank.com/research/article/2024-02-28-how-will-millennials-spend-us90-trillion