HMRC to pocket record £8bn in inheritance tax this year

hmrc
hmrc

The taxman is on track to earn a record £8bn from inheritance tax this year as more estates are forced to pay the levy, experts predicted.

Between April and August this year, £3.2bn was paid in inheritance tax, 10pc more than the same time last year. In the 2022-2023 tax year, HM Revenues and Customs earned a record £7.1bn from the levy.

Britons have paid an average of £133m a week in inheritance tax so far this year as frozen tax thresholds and inflation mean more estates are over the tax-free threshold.

The increased tax take comes just days after Conservative MP Anthony Browne called for the threshold for the tax, which is currently frozen until 2028, to be increased to £1m for all in an attempt to win the next election.

Inheritance tax is charged at 40pc on wealth over £325,000. Individuals then have an extra £175,000 allowance towards their main residence if it is passed to children or grandchildren, and spouses can share their allowances. This takes the allowance to £1m between a married couple.

But the South Cambridgeshire MP said the Government should scrap the £175,000 relief on family homes and raise the threshold instead.

The Telegraph, along with some 50 MPs, is calling on the Government to abolish inheritance tax.

Originally designed for the wealthiest, the tax is now affecting more middle-class families because house prices have grown but the tax-free allowances have been frozen since 2009.

Previous official estimates said that 13,400 extra households would have to pay the tax as a result of the frozen threshold, but internal HMRC forecasts revealed in July by The Telegraph reveal that the true number is now set to be 49,400.

Officials blamed higher than expected inflation for the increase.

Forecasts in November 2022 suggested that inheritance tax receipts would rise from £7.1bn last year to £8.4bn by 2027-2028, but experts now predict the £8bn threshold will be reached much sooner.

Rachael Griffin, tax and financial planning expert at Quilter said: “The total inheritance tax take for the 2022-23 tax year was £7.1bn, meaning this year’s take is well on course to break new records and could come close to £8bn.

“This increasing revenue causes a policy conundrum for the Government as election season draws nearer and more Tory backbenchers call for inheritance tax reform or its abolition as a vote-winning tactic,” Ms Griffin added.

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