Surge in Inheritance Tax Receipts Amid Potential Budget Alterations – All You Need to Know

The Upward Trend of Inheritance Tax Collections

Last month, the collected revenue from inheritance tax (IHT) spiralled to £749 million, bumping the total IHT revenue for the 2024/2025 tax year to an impressive £2.8 billion. This has bolstered the total with an impressive 9% or £230 million in contrast to the four-month collection in the previous year.

Rumours are steadily catching the wind as Chancellor Rachel Reeves preps for the upcoming Autumn Budget. She could likely tweak the inheritance tax laws to garner more fiscal resources. In recent years, the IHT collection has seen a consistent surge. The last reported revenue for one entire tax year was £5.99 billion in 2021/2022, marking a £230 million rise over the preceding year.

Factors Contributing to the Rising Inheritance Tax Receipts

The reasons behind the sharp increase in IHT receipts paid by grieving families include static tax-free allowances and escalating house prices. The tax-free allowance, also known as the nil-rate band, is held at £325,000, with an additional £175,000 for those passing on their family home to their descendants.

Anticipated Changes in the Inheritance Tax Rules

Looking ahead, Rachel Reeves will present the first Budget of the Labour government on October 30. The government has already dismissed ideas about hiking income tax, National Insurance, VAT, and corporation tax. However, Reeves has hinted at challenging decisions on the horizon to cushion the chasm in the public finances.

Strategising to Minimise Your Inheritance Tax Bill

It’s worth noting that families can take certain measures to pass their assets to the next generation in a more tax-efficient manner. For instance, there are gift allowances that permit the transfer of up to £3,000 each year without it counting towards your estate. It’s also worth considering using pensions to efficiently bequeath wealth. Current regulations mean that you can assign your pension to a beneficiary without IHT being due. For more ideas on how to reduce inheritance tax, explore our detailed guide on Eight ways to reduce your IHT bill.