Inheritance Tax raises £4.3bn in 6 months but is in the spotlight for reform
Figures published by HM Revenue and Customs (HMRC) this morning, show inheritance tax receipts hit £4.3bn in the 6 months from April to September 2024.
This is £400m higher than the same period in the previous tax year and continues the upward trajectory over the last two decades. Last full tax year inheritance tax raised £7.499bn and currently just one in 20 estates are liable. But that may be about to change dramatically if the Budget rumours are to be believed.
Nicholas Hyett, investment manager at Wealth Club said: “Inheritance tax is an absolute cash cow for His Majesty’s Revenue and Customs, which is why it remains in the spotlight ahead of next weeks’ Autumn Budget. No one knows what changes will be announced, but most agree there will be some attempt to milk more revenue from estates.
The great thing about inheritance tax from the government’s point of view is that it’s complicated, with a whole host of rules that could be tweaked to boost the tax take. Tweaks could include changes to Business Relief, including on AIM shares, making pensions subject to inheritance tax and extending the time period needed to make gifts inheritance tax free.
Whilst this may only affect a minority of people, it will infuriate those it does and could still do serious economic damage.
Business Relief helps family owned businesses pass between generations as well as encouraging investors to invest in young, fast-growing businesses – whether that’s on AIM or through starts ups qualifying for EIS. Removing the relief would decimate smaller, family-owned businesses, while also making backing smaller companies less attractive.
Removing the IHT free status of pensions will also be damaging. It is in any government’s interest that people can support themselves in retirement. Constantly changing the rules puts people off saving in a pension, whether they are rich or poor.
All government’s need to balance short and long term priorities. Throwing the kitchen sink at IHT may be good politics in the short term, but it risks doing long run damage.”
