The rise of female wealth and IHT: does HMRC do enough to help?

04 July 2023

Following record highs in inheritance tax (IHT) receipts last year, HMRC’s latest IHT statistics show a total of £1.2bn in IHT receipts for April 2023 and May 2023, an increase of 9.1% compared to the previous year. 

That seemingly flies in the face of comments made by the late Nigel Lawson, the former chancellor, who famously stated that, ‘inheritance tax is a voluntary tax – you can either do nothing and volunteer (for your beneficiaries) to pay it, or you can take steps to avoid it’. 

If IHT is a voluntary tax, why are receipts reaching record highs? The spiralling increase in house prices in recent years and the effects of fiscal drag are certainly factors but are they masking a broader issue? Is HMRC simply relying on the lack of understanding from some taxpayers on how the IHT system works to boost the Treasury’s coffers?  

Given that IHT is not typically due between spouses, widows and widowers may find that the responsibility of taking any steps to minimise an exposure to IHT is also inherited, along with the family’s assets.  

Average life expectancy in the UK remains higher for women, around 83 years, than it is for men, around 79 years. This difference in life expectancy appears to tie into HMRC’s statistics, which show that in the tax year 2019-20, taxpaying male-owned estates had an overall tax liability of £2.36 billion, whereas taxpaying female-owned estates had a higher overall tax liability of £2.6 billion. That split could increase further as The Centre for Economics and Business Research estimated that women will own 60% of the UK’s wealth by 2025. Women outliving their partners is likely to be a factor in this trend but it may be too simplistic to suggest it is simply due to life expectancy. For example, the 2023 Rose report found that women doubled the number of businesses they created last year compared to the 2018 figure.  

In practice, it is not uncommon for the management of the family’s finances to fall more on one person’s shoulders rather than it being shared equally. In the case of a widow inheriting this responsibility, research suggests that it may represent a more daunting exercise. In the Financial Lives Survey by the Financial Conduct Authority in 2020, individuals were asked to score themselves in response to certain statements. Its results showed that 42% of women surveyed considered themselves to have low knowledge about financial matters and 21% had low confidence with working with numbers. By comparison, the figures were 32% and 14% respectively for men answering the survey.

HMRC may inadvertently be benefitting from a lack of understanding of those who are thrust into the spotlight of dealing with the family’s finances following the death of a loved one. HMRC’s Charter indicates that they commit to provide clear information and provide services that are accessible and easy to use. Anyone facing the prospect of understanding the IHT rules for the first time may reasonably question whether these commitments are being met.   

The IHT regime is complicated and the format of HMRC’s guidance on the subject could be conveyed in a way that is much more relatable and accessible, particularly those coming to the subject for the first time. For example, HMRC could consider presenting guidance in a number of formats to suit different learning styles, as currently, it is often only presented in written text. HMRC should not be relying on a lack of confidence or knowledge in generating tax revenues, even if it is not deliberately intending to do so.