Inheritance Tax Revenue Soars as More Families Face “Death Tax” Burden
London, UK – Bereaved families are increasingly finding themselves liable for inheritance tax (IHT), with a notable 13% surge in the number of estates paying the levy. New figures from HM Revenue and Customs (HMRC) reveal that 31,500 estates were subject to IHT in the 2022-23 tax year, an increase of 3,700 from the previous year.
The Treasury has seen a substantial boost in revenue, collecting £6.7 billion from IHT, a 12% rise compared to the 2021-22 tax year. HMRC attributes this growth primarily to escalating asset values and the continued freeze on IHT thresholds.
The financial pressure on families is expected to intensify. From April 2027, pensions will become subject to IHT, a move projected by the Office for Budget Duty to potentially double the proportion of estates paying the tax to 10% by 2030. Further changes impacting how farms and family businesses handle IHT are also anticipated to considerably increase the tax take, with projections suggesting the Treasury could collect over £14 billion annually in IHT by the end of the decade.
Charlene Young of investment platform AJ Bell commented,”The government is collecting more in death taxes than ever before.” She added, “HMRC proudly states that fewer than half of deaths require interaction with the taxman to establish if there is tax to pay – something that will soar when the IHT raid on family businesses, farms and pensions comes into force.”
Currently, the first £325,000 of an estate is exempt from IHT, with any amount exceeding this taxed at 40%. This threshold can rise to £500,000 for estates under £2 million if the main home is passed to a direct descendant, thanks to the residence nil-rate band. Assets left to a spouse or civil partner,including pensions from 2027,are exempt. Couples can combine their allowances, potentially passing on up to £1 million tax-free, provided the total estate value remains below £2 million. The main IHT threshold has remained static as 2009, and the residence nil-rate band has been frozen since 2021.
