Increase in International Humanitarian Transfers (IHT) by nearly £100 million in April; Further rise in bills anticipated.

Increase in International Humanitarian Transfers (IHT) by nearly £100 million in April; Further rise in bills anticipated.

Inheritance Tax (IHT) yielded a staggering £780 million for the Treasury in April, marking the second highest monthly total ever recorded and a £97 million increase compared to the same month last year, according to HMRC data.

The continuing freeze on tax thresholds and rising house prices are pushing more individuals into the IHT bracket, contributing to the elevated revenue. For the 2024/25 tax year, IHT takings hit a record £8.2 billion, with predictions indicating that this year's figures will surpass that amount.

Experts, such as Shaun Moore from wealth firm Quilter, suggest that the upward trend in IHT collections is indicative of the government's effective "stealth tax strategy." Moore's commentary underlines the ongoing issue of more families being drawn into the IHT net, often without realizing the impact until it's too late.

Increasing IHT bills are a concern for many families as the frozen nil-rate bands drag more estates into the tax's scope. New analysis shows that the average earner might now face an IHT bill of £200,000. The main IHT nil-rate band, which has been fixed at £325,000 since 2009/10, and the residence nil-rate band, introduced in 2017/18, have both seen slow increases.

While property prices have soared, the residence nil-rate band has remained at £175,000 since 2020/21. This disparity between rapidly growing property values and stagnant tax thresholds is resulting in a larger number of families being ensnared by IHT.

Major changes are expected to IHT, agricultural relief, and pension death benefits in the UK from 2026 to 2030. Notably, inheritance tax relief for businesses and agriculture will be capped at £1 million for an individual, with any excess receiving a reduced 50% relief, effectively raising the IHT rate on excess sums to 20%. Meanwhile, unused pension savings may be included in an estate for IHT purposes starting from April 2027, which could significantly impact how pension assets are passed on to beneficiaries.

Individuals and families concerned about their IHT liabilities are advised to assess the value of their estate, including an up-to-date evaluation of property wealth, to determine if they may be subject to IHT. Seeking professional financial advice can help navigate complex estate planning matters efficiently.

In addition to IHT developments, income tax and National Insurance receipts also registered a gain in April, rising to £47.9 billion, which is £2.9 billion higher than the same month last year. With income tax thresholds remaining unchanged, more workers are finding themselves falling into higher tax brackets due to pay rises that don't keep pace with inflation.

Amid the ongoing refinement of the UK's tax policies, experts warn of potential additional tax hikes in the Autumn Budget, as controversy swirls around a leaked memo suggesting a £4 billion tax raid on savers and investors. The memo reportedly outlines a series of measures, such as reinstating the pensions lifetime allowance, scaling back dividend tax reliefs, and a higher corporation tax rate for banks, that could impact various segments of the British taxpayer.

With frozen tax thresholds and narrowing reliefs, households across the UK are feeling the strain, emphasizing the importance of careful tax and financial planning in the evolving UK tax landscape.

1. The steady increase in IHT collections indicates a government strategy focusing on personal finance and savings, which could impact individuals and families who are unaware of the rising IHT bills, particularly those with property wealth.
2. As property prices continue to rise, the ongoing stagnation of the residence nil-rate band in the personal-finance sector might place more families in the scope of IHT, with potential average bills reaching £200,000.
3. In the upcoming years, changes in IHT, agricultural relief, and pension death benefits may affect the personal finance of UK taxpayers, as unused pension savings could be included in the estate for IHT purposes and relief for businesses and agriculture might be capped, potentially increasing IHT bills for excess sums.

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