Inheritance tax increased to £2.8bn between April and July this year, HM Revenue and Customs (HMRC) reveals.
The latest figure is £0.2bn higher than in the same period last year.
Quilter tax and financial planning expert Rachael Griffin says: “This increase, ahead of first Labour’s first autumn budget, will rekindle debates about whether this tax will be increased as the government attempts to shore up public finances.”
“As Labour navigates these complex issues in the upcoming budget, there is a strong argument for simplifying the IHT system and making it more appealing to gift during your lifetime.”
“The current system’s complexity often leads to confusion and inequities, with wealthier estates better equipped to navigate and minimise tax liabilities. A simpler system could not only reduce administrative burdens for taxpayers and HMRC but also make the tax fairer. Increasing the gifting allowances also would encourage more wealth to cascade down the generations.”
“Simplifying IHT could involve increasing the nil rate band, which has remained static for over a decade, or potentially lowering the headline IHT rate in exchange for eliminating or reducing complex reliefs. Such reforms could make the system fairer, particularly for middle-income families who increasingly find themselves liable for a tax originally intended for the very wealthy.”
“As the debate on IHT reform continues, the upcoming budget will be crucial in determining whether Labour chooses to maintain the current complex reliefs or pivot towards a simpler, more equitable system that better reflects modern economic realities.”
Meanwhile, Evelyn Partners tax partner Laura Hayward adds: “Annual rises in inheritance tax paid are pretty much a given these days, as property and financial market assets continuing to rise in value, and IHT allowances remain frozen.”
“Inevitably, as more estates find they exceed the nil-rate bands, and more assets in each liable estate become taxable, the IHT take creeps upwards. With no complaints on that from the Treasury, there is little incentive for the Chancellor to halt this trend.”
“Rather, there will be a temptation to capitalise on it to fill gaps in the public finances.”
“Senior Labour figures have made it clear they think certain reliefs – specifically business and agriculture property relief – are too generous and think-tanks seem keen that defined benefit pension pots are brought into the remit of IHT. We already know that the new Government will crack down on ‘abuse’ of reliefs and that can easily lead to a review of the reliefs themselves.”
“So Rachel Reeves’ first big fiscal statement on 30 October will be closely watched for any review into IHT reliefs, or suggestion that pension pots could be deemed part of a deceased’s estate.”
