Inheritance tax forecast to hit record high

Inheritance tax forecast to hit record high due to the pandemic impact and inflated property prices

Research by peer to peer real estate investment platform, easyMoney, has found that the total level of inheritance tax paid to HMRC is on course to hit another record high during the 2022/23 financial year, having already done so in 2021/22 following a 13.7% annual increase.

easyMoney analysed the level of inheritance tax paid across the UK since 1999 and found that to date, a huge £87.5bn has been paid by those passing on their accumulated money and assets to loved ones.

During the 2021/22 financial year, no less than £6bn was paid in inheritance tax, the largest annual sum since 1999.

The level of inheritance tax paid also increased by 13.7% on an annual basis, with the impact of the pandemic no doubt a driving factor behind this increase – the fourth largest annual increase since 1999.

However, the proportion of total tax receipts accounted for by inheritance tax did fall to 0.8% in 2021/22, down from 0.9% the previous year.

easyMoney estimates that the level of inheritance tax paid in 2022/23 looks set to climb to a new record high and in doing so, would account for 1% of all tax receipts received by HMRC.

The latest figures for the 2022/23 tax year show that so far, £4.75bn has already been collected in inheritance tax over just eight months. easyMoney estimates that this could climb as high as £7.1bn by the end of the year.

Should this be the case, it will mark a new record high in terms of the total level of inheritance tax paid in a single year and will also sit 17.8% higher than the previous year – the second highest annual increase on record.

Jason Ferrando, CEO of easyMoney says

“The level of inheritance tax paid on our hard earned assets has continued to climb to record highs and looks set to do so again this year.

While it’s fair to say that the pandemic has almost certainly had an unfortunate hand in driving this trend in terms of the number of receipts received by HMRC, the primary factor driving this uptick in actual tax paid is likely to be the meteoric rate of house price growth seen in recent years.

There are ways to minimise the inheritance tax hit for those that understandably feel aggrieved at handing the government a slice of their hard earned wealth. Passing down a living inheritance is the most popular route and could be done via equity release, gifting, creating a trust, or via political or charitable donations. The best course of action is to contact a financial advisor who will be able to explain all the options available to you in detail.”