21 July 2023
‘The inheritance tax (IHT) paid in the year so far is beyond expectations, and economists’ forecasts are already being blown out of the water.
‘The Office of Budget Responsibility forecasted a modest £0.2bn increase in IHT revenues for the financial year to 31 March 2024. We have already seen an increase of that amount in the first three months of this year.
‘This is a record-breaking period for the amount of IHT being paid, in part due to house price inflation in recent years and higher interest rates may be encouraging executors of estates to pay any IHT early to avoid a punitive charge from HMRC.
‘Ordinarily, there is at least a six-month delay between someone passing away and any IHT being paid by an estate. Much of the IHT to be paid for the rest of the year will be from the estates of those who have already passed away. As property prices have not yet suffered a significant slump, the Treasury could be in for an even bigger windfall than the £7bn in IHT receipts received last year.
‘The government needs to be mindful that if property prices do crash then there is the potential for some estates to reclaim IHT if there is a later sale of the property at a lower value.
‘These record IHT receipts will put pressure on any plans by the government to abolish IHT. It could be more difficult to justify scrapping IHT when it is helping to balance the Treasury’s books, particularly when receipts from other taxes, such as stamp duty land tax, are falling.’