Skyrocketing inheritance tax proceeds hit new peak, with industry experts cautioning increased number of taxpayers may soon be affected
The almighty haul of inheritance tax (IHT) reached another mind-boggling high in the past tax year. Hold onto your hats, folks, as the Treasury raked in an estimated £8.2billion, marking an £800million increase compared to the previous year. All thanks to frozen thresholds and soaring asset prices!
The latest HMRC numbers reveal that IHT receipts soared in the period from April 2024 to March 2025. And, considering recent trends, it's most likely these numbers will keep shattering records as long as tax-free thresholds remain in a deep freeze.
More people are finding themselves slapped with IHT bills as asset inflation coupled with rigid thresholds suck more and more folks into the tax net. And it's looking like this trend will only get worse when pensions start being included in the equation come 2027.
So, what's this IHT business all about? Simple! The headline rate is a whopping 40%, taxed over the lucky £325,000 threshold, with an additional £175,000 allowance granted to direct descendants. Sweet, huh? Spouses and civil partners can share their allowance, enabling families to pass up to £1million to their darling offspring tax-free – all these thresholds are locked in until 2030.
Ian Dyall, head of estate planning at Evelyn Partners, put it bluntly: "The IHT take for the Treasury has reached another record financial year – a trend that doesn't look like it's changing anytime soon, as long as these friggin' thresholds stay frozen."
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, spoke more to the growing need for families to address the IHT issue. "Nowadays, it's not just a rich folks' problem – it's an issue that needs to be considered by everyone," she said.
Recent market volatility might just be a silver lining, offering some sweet relief to families scared that their estate's value could attract a hefty IHT bill. As Dyall explained, "If the estate's value has unexpectedly dropped between the time of death and when probate is granted and assets are distributed, they might even get some cash back from the taxman."
Pension rules are set to change too, as they'll no longer be shielded from IHT from 2027, dragging pensions into the equation and adding to the IHT burden. And rumors have it that the Chancellor might be looking to tinker more with IHT in the future. So, brace yourselves, folks!
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Didn't know that your humble abode might make the taxman salivate? Well, grab a cup of Joe and brush up on the deets – you never know when you might need that tax break!
- The increasing amount of inheritance tax (IHT) collected by the Treasury highlights the importance of understanding personal finance and estate planning, especially as pensions are set to be included in the equation from 2027.
- Ian Dyall, head of estate planning at Evelyn Partners, warns that the record IHT take for the Treasury is likely to continue as long as tax-free thresholds remain frozen, making it an issue that needs to be considered by everyone, not just the richest.
- Despite recent market volatility, the potential for an estate's value to attract a hefty IHT bill remains a concern for many families. However, if the estate's value drops between the time of death and when probate is granted and assets are distributed, families might even receive cash back from the taxman.
- With the IHT threshold frozen until 2030, expert Helen Morrissey of Hargreaves Lansdown advises families to take action to address the IHT issue, as it's no longer just a problem for the wealthy.
- As the housing market and asset prices continue to soar, the number of people subject to IHT is also increasing, making it essential to consider personal finance and investment strategies, such as investing in tax-efficient instruments, to minimize the impact of IHT.
- Aside from planning for IHT, it's also crucial to be aware of IHT implications when dealing with properties, such as leaseholds or when selling a family home, to ensure that you're making informed decisions for your personal finances and the future of your estate.
