UK Edition
The Treasury has raked in an extra £700m from inheritance tax since last April after the housing market boom and Rishi Sunak’s decision to freeze thresholds lifted the levy's revenues to an all-time high.
The public purse was bolstered by a 16pc increase in inheritance tax receipts in the financial year to January with the Chancellor set to raise billions more from people passing on their wealth in the coming years.
Total tax receipts from those leaving money and assets behind since April have leapt past £5bn and are on course for a record year, the Office for National Statistics data suggested. It compares to £4.3bn generated over the same period last year.
The double-digit surge in house prices and Mr Sunak’s move, criticised as a stealth tax raid by opponents, have driven the surge as a bigger chunk of inheritances become taxable.
The standard inheritance tax rate is 40pc and is only charged on the part of estates above the £325,00 tax-free threshold with an extra £175,000 residence nil-rate band also introduced in 2017.
The threshold normally rises over time to keep pace with inflation but Mr Sunak has frozen this tax-free limit until April 2026 in a bid to shore up the public finances. That is generating more money particularly when combined with the boom in the housing market, which has pushed average asking prices up by nearly £40,000 since Covid struck.
Darran Harrison, wealth planner at Kingswood, said the freeze was “resulting in many families receiving increased inheritance tax bills as more estates are brought into scope on the back of rising property and share prices”.
The Office for Budget Responsibility expects that billions of pounds more will be generated from inheritance tax in the coming years. By 2026-27, £7.6bn is expected to be generated annually from squeezing inheritances.