Inheritance tax takings are set to reach a new record by the end of the tax year, experts predict.
IHT receipts between April 2024 and January 2025 rose to £7billion, HMRC data shows.
It means the tax take for the period increased by £700million compared with the same period a year ago.
Hargreaves Lansdown said the Government’s IHT take is likely to grow beyond the record, set in 2023/24.
Helen Morrissey, head of retirement analysis at the investment platform, said: ‘The inheritance tax creep crawls ever higher, hitting £7billion so far this tax year.
‘This puts it well on track to surpass the £7.5billion record that it hit a year earlier.’
The year prior, 2022/2023, the tax earned £7.1billion for the Government.
Growing receipts: Inheritance tax takings could hit a new record, after they rose to £7billion between April and January
From 2027, the Government is set to include pensions in inheritance tax calculations, despite thresholds being kept at the same level.
Morrissey says this will only increase the Government’s tax takings.
Meanwhile, Shaun Moore, tax and financial planning expert at Quilter, said: ‘This relentless rise in inheritance tax receipts is baked into government policy.
‘With the nil-rate band (£325,000) and residence nil-rate band (£175,000) frozen until 2030, more and more families are being dragged into paying the tax.
‘Rising house prices, particularly in the South East, mean many people that don’t consider themselves to be wealthy will now find themselves above the threshold and facing a 40 per cent tax bill.’
However, with the IHT net being cast ever wider, Morrissey says people will go further to cut down their bills.
She said: ‘There are things you can do to try and reduce an inheritance tax bill, and we expect people will start to take action sooner rather than later.
‘Gifts of any size fall out of your estate after seven years so we can expect to see people start to gift assets to loved ones now so they can start the countdown ticking.
‘We will also likely see people start to use the various gifting allowances available – such as the £3,000 annual exemption – to reduce the size of their estate.’
Tax take: How much the Government is raking in monthly from IHT, with the dark blue line representing 2024/25
Capital gains takings declined
Capital gains tax receipts, meanwhile, declined 3 per cent to £10.28billion, going against the usual spike CGT takings see in January.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: ‘So many people brought forward CGT bills ahead of the Budget, worried about potential hikes.
‘In the end, the Government increased the rate on stocks and shares and other non-property assets from 20 per cent to 24 per cent for higher rate taxpayers and from 10 per cent to 18 per cent for basic rate taxpayer.
‘This was a blow for investors but wasn’t anywhere near as big a rise as had been rumoured.
She added: ‘After the disruption of the Budget and associated rumours, we can expect this tax to settle in higher than before, thanks to the shrinking of the annual allowance and the higher rate.’
Despite the recent slowdown in CGT receipts, the tax’s takings have risen by 271 per cent over the past decade, reaching £14.49billion in 2023-2024, compared to £3.91billion ten years ago.
Meanwhile, income tax taking surged ahead of previous years, despite generally being higher in January due to the self-assessment deadline.
The effects of fiscal drag saw £49.15billion paid in income tax as frozen tax thresholds pushed more people into the higher tax bands. The freeze is in place until 2028.
Moore said: ‘Without an explicit tax rise, the government is collecting more from taxpayers each year simply by keeping thresholds static.
‘National Insurance changes have also played a role. Employer NICs are set to rise from 13.8 per cent to 15 per cent in April 2025, and the threshold at which employers start paying NICs will drop from £9,100 to £5,000.
‘These changes will increase costs for businesses and potentially affect wages and hiring decisions.’
SAVE MONEY, MAKE MONEY
£100 Isa cashback
£100 Isa cashback
Open a new stocks & shares Isa with £10k
Fix energy bills
Fix energy bills
Find out if you can save with our partner uSwitch
5.03% cash Isa
5.03% cash Isa
Get 5.03% with our code TIM
5.05% cash Isa
5.05% cash Isa
Cash Isa and money management
Sipp cashback
Sipp cashback
Up to £3,000 when you open a Sipp by 28 Feb
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence. Terms and conditions apply on all offers.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
