Inheritance tax intake totalled £1.2bn for April and May, but debate about the future of the tax continues as pressure mounts on the government to scrap it.
Data published today (June 21) by HM Revenue and Customs showed that the receipts for April and May were up by £0.1bn on the same period last year.
Commenting on the figures, Evelyn Partners tax partner Laura Hayward noted that in recent weeks IHT has become “a real hot potato” with some putting pressure on the government to abolish the largely unpopular tax.
“However, it’s important to remember that no decisions have been announced as of yet and while this debate bubbles away more families are being dragged into paying IHT.
“Today’s fresh data release from HMRC shows the extent to which the Treasury is continuing to benefit from ever increasing IHT receipts,” Hayward said.
“What’s more, given inflationary growth of asset values coupled with frozen allowances, as things stand the cash cow that is IHT looks set to be very lucrative for the Treasury for many years to come,” she added.
According to the Office of Budget Responsibility’s latest forecast, an expected £38bn will be raised over the next five years, while in the tax year 2027/28 IHT receipts will rise to £8.4bn.
Quilter’s tax and financial planning expert, Rachael Griffin added that today’s figures illustrate why the Chancellor may resist demands for reform for “as long as possible”.
Griffin noted that the 2022/23 IHT take reached a record-breaking £7.1bn and said while IHT is not the government’s most lucrative tax, abolishing it altogether would “punch a hole in the budget, compounding an already bleak economic outlook”.
“However with the next general election on the horizon in 2024, an increasingly under-fire Conservative government running out of time to drum up support may believe it has no choice but to reform one of the most hated taxes in Britain as a way to curry favour framed as helping more Brits pass on wealth to help the next generation.
“There are various mechanisms in which they could do this, but revising the threshold or cutting the 40 per cent rate would be simplest,” Griffin said.
jane.matthews@ft.com
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