Inheritance Tax Receipts raise £1.4 billion in two months

The latest figures from HM Revenue and Customs (HMRC) released this morning, show that inheritance tax receipts hit £1.4 billion in just the first two months of the 2024/25 tax year. This is £200 million higher than the same period in the previous tax year, and continues the upward trend over the last two decades.

In the 2023/24 tax year inheritance tax raised £7.499bn in revenue for HMRC. However, that could increase dramatically should the Labour Party win the election – a pledge to restrict non-doms from shifting money offshore is expected to raise £430 million a year, equivalent to a 6% increase in the overall inheritance tax take. Combine that with thresholds that are likely to remain frozen, and the UK’s most hated tax is only likely to grow.

Inheritance tax has been a feature of several manifestos and campaigns this election:

Labour’s pledge: to end the use of offshore Trusts to avoid inheritance tax, generating an estimated £430 million in income for the Treasury each year.
Reform’s pledge: to abolish inheritance tax for all estates under £2m, which would leave just 2% of estates liable for inheritance tax. The rate above £2m would be 20%, with the option to donate to charity instead.
Conservative’s pledge: to retain inheritance tax reliefs for family farms to ensure they can be passed down without tax burdens.

Nicholas Hyett, Investment Manager at Wealth Club said:

“Inheritance tax is a hot topic this election.

Labour are targeting non-doms who shelter their money abroad and the Conservatives have accused Labour of harbouring secret plans to go further – with inheritance tax notably absent from the list of taxes in the Labour manifesto that will not be increased. Meanwhile Reform have promised generous inheritance tax cuts as it looks to win over voters.

The reality is that inheritance tax would likely rise under either of the two main parties. Freezes on thresholds over the last few years, partnered with decades of house price rises have brought more and more estates into the tax band. Attempts to increase taxes on wealthy non-doms may be politically popular, but most of the tab will still be picked up by families who would not consider themselves particularly rich. For these families, their standard of living hasn’t changed, indeed inflation means it might have gone backwards, but frozen allowances mean the government now considers them wealthy enough to face inheritance tax.

As things stand there are some useful ways to mitigate inheritance tax – whether that’s making gifts in your lifetime, passing pensions on tax free, investing in certain qualifying AIM shares or making EIS/SEIS qualifying investments. However, political uncertainty is right now – and with inheritance tax a bit of a political football it’s difficult for investors to make informed decisions.

As ever, uncertainty is the enemy of investment ultimately undermining economic growth.”