Inheritance tax receipts are going through the roof with new record highs achieved every month – the latest for April 2024 to February 2025 are £7.6bn – and they are forecast to keep climbing to hit £9.7bn by 2028/29.

On the face of it that is good news for a government looking for extra revenue to support spending plans and help drive its growth agenda. Delivering economic growth is something we can all get behind even if it does mean paying IHT.

But focusing on IHT as a contributor to the growth engine is a massive misfire. On a basic level IHT even at record highs accounts for less than 1% of total government revenue and will not fund much or make a major contribution to growth.

More importantly focusing on IHT misses the big picture of pensioner property wealth which retired homeowners are literally sitting on and which could be put to work supporting their retirement lifestyle and helping family to make their first steps on the property ladder.

Giving over-65s more spending power will help boost the economy, while enabling younger generations to buy houses will further support the economy and help social mobility and possibly even job creation.

Unleash over-65s property wealth

Key Later Life Finance’s analysis estimates that over-65s own property wealth outright with no mortgages valued at more than £2.944 trillion. It is a big figure and one which IHT receipts will never get anywhere near.

The scale of the wealth underlines the need for a fundamental reassessment of the role of property wealth in financial planning with many older clients holding considerable capital tied up in their homes. It should be being put to work funding their retirement and where appropriate helping children and grandchildren on to and move up the property ladder with gifting.

Unfortunately, extending the freezing of IHT thresholds and changing agricultural and business reliefs is the extent of the government’s approach to pensioner property wealth. Instead of unleashing the Bank of Mum and Dad or Gran and Grandad, the plan appears to be waiting for them to die and collecting IHT on their estate.

The better approach to help boost the growth agenda would be to make it easier to gift money for certain purposes. Instead of extending the seven-year rule on IHT exemptions to 10 years, as has been rumoured, there should be incentives for using property wealth as part of a living inheritance to help family members at a point in their lives when they most need it – and at a time when it would make the most positive difference to the broader economy.

Empower the Bank of Mum and Dad or Gran and Grandad to spend their own money now while children or grandchildren can make use of the cash.

Make it simple

The complexity of IHT rules deters over-50s homeowners and over-65s in particular from using their property wealth to fund deposits.  A key issue is the potential for IHT penalties if gifts are given seven years before death – the seven-year clawback rule. Removing it for gifts from property wealth using equity release would be a major help.

There currently are complex rules on gifting money for weddings and civil partnerships with different tax-free amounts for children and grandchildren. There should also be some kind of exemption for gifts that are being used for deposits by first-time buyers to make it easier for older homeowners to give money.

Make use of the products available

Modern lifetime mortgage products can help with tax efficient intergenerational wealth subject of course to good advice. When considering making gifts, customers must consider the potential implications on their own financial well-being – including the possibility of needing to fund long-term care in later life. Specialist advisers will ensure all options are considered and risks and benefits properly weighed up.

Lifetime mortgage lenders have tackled the evolving needs of a more diverse range of customers by creating a range of innovative new products offering higher LTVs, shorter fixed early redemption charges and increased flexibility around regular payment options. They are a suitable option for a significant percentage of over 55s customers enabling them to actively manage their borrowing as their circumstances change through later life which for many will include looking to support children and grandchildren.

The money tied up in property wealth held by the over-65s needs to be put work to improve the standard of living across generations and in so doing deliver a boost to the economy. It certainly makes more sense than boosting IHT receipts.

Will Hale is chief executive at Key Advice