The United Kingdom has witnessed a significant increase in inheritance tax (IHT) receipts, which are expected to continue rising due to recent policy decisions.
For the nine months leading up to December, the UK tax authority reported collecting £6.3 billion (€7.5 billion) in inheritance tax, reflecting a £600 million (€710 million) increase compared to the same period last year.
This uptick in revenue is primarily attributed to an increasing number of estates becoming liable for the tax, a trend exacerbated by the government’s decision to freeze tax bands. Currently, inheritance tax is levied at a rate of 40% on the value of estates exceeding £325,000. The government has announced that it intends to maintain this tax threshold until 2030, which, combined with inflationary pressures, will result in a greater number of individuals falling into the taxable bracket as their assets appreciate over time.
Factors contributing to the surge in inheritance tax receipts include the accumulation of wealth among older individuals and the worsening trend of more estates and larger asset values crossing the exempt thresholds. According to Carl Green, financial planning director at wealth management firm Evelyn Partners, “Inheritance tax provides a steadily rising flow of receipts for the Treasury as more estates, and more assets within each estate, are drawn across the exempt thresholds that have remained unchanged for many years.”
The increase in wealth among older demographics has been fueled by climbing house prices and strong performance in various investment portfolios. As more families navigate the complexities of inheritance planning, it is expected that the trend of higher IHT receipts will persist, impacting financial strategies for many households.
