Jeremy Hunt is expected to outline a series of tax cuts in Wednesday’s Autumn Statement – Chris J Ratcliffe/Getty Images Europe
The Treasury is on course to ensure a record inheritance tax this year as calls for the Chancellor to cut rates grow in Wednesday’s Autumn Statement.
Inheritance tax (IHT) receipts from April to October were £4.6 billion, up £500 million from the same period last year, according to new figures from HM Revenue and Customs.
The 12 per cent increase means total IHT receipts for 2023/24 are on track to reach £7.8 billion, surpassing last year’s record annual total of £7.1 billion.
The Treasury’s IHT income has surged after the tax-free threshold was frozen at the 2020/21 rate for seven years instead of being adjusted in line with inflation.
At the same time, the pool of taxable cash has grown as inherited wealth has grown faster than income. This is due to factors like increase in house price.
The figures come ahead of Jeremy Hunt’s Autumn Statement on Wednesday, when he is expected to outline a series of tax cuts to boost economic growth.
This includes the possibility of reducing the IHT levy from 40 per cent to 20 per cent.
Stephen Lowe, of retirement specialist Just Group, said: “At the current rate of tax collection, inheritance tax would raise more than £7.8 billion for the Exchequer.”
This would be £600 million more than the Office for Budget Responsibility (OBR) forecast in March.
As inherited wealth continues to grow, increasing numbers of people are being hit by inheritance tax charges.
The Institute for Fiscal Studies has predicted that 13 per cent of deaths will result in an IHT bill by 2030, more than double the 7 per cent expected over the next few years.
Without any rate cuts, the OBR expects the Treasury to receive £8.4 billion in IHT receipts by 2027–28.
However, Andrew Tully, director of Nucleus Advisors, said this forecast was likely to be exceeded based on the current trajectory.
Individuals get a £325,000 tax-free allowance on their inheritance, plus an additional £175,000 nil-rate band for inherited residential property.
When combined, this means they can inherit up to £500,000 tax-free. Above this limit, IHT is charged at 40 per cent.
What taxes will the Chancellor cut?