Inheritance tax (IHT) receipts for April 2022 to January 2023 were £5.9bn, according to latest HM Revenue & Customs (HMRC) figures, which is £0.9bn higher than the same period a year previously.
Canada Life technical director Andrew Tully said the £5.9bn total tax take from IHT was 15% higher than the same period last year.
"There is no ignoring the fact that we are moving in an upward trend and are on track to break last year's record of £6.1bn by more than 10%. The OBR predicted last November that IHT receipts would keep growing to reach £7.8bn by 2027/28."
Tully explained the current tax-free allowance of £325,000 is frozen until 2027/28. "This freeze, plus house prices skyrocketing in recent years, and soaring inflation, mean that more and more families could face an unforeseen and unwelcome inheritance bill from the tax man," he said. "Indeed, the belief that IHT is strictly for the affluent no longer applies."
Mitigation
Tully said there were many steps families could take to cut bills: "There is a considerable amount of planning which can reduce IHT bills. These include setting up a trust, making full use of gift allowances which allow you to pass on money to family while reducing your estate, and making a will and leaving a legacy to charity.
"Pensions are also normally excluded from your estate for IHT purposes. You can potentially pass on your pension in a tax-efficient way so take this into account when deciding which assets you use to provide an income in later life. Expert advice will be able to understand your specific situation and make the most appropriate recommendation for you and your loved ones."
Evelyn Partners tax expert Laura Hayward agreed planning was key to cutting bills.
"With monthly IHT receipts continuing to show year-on-year increases, families should give careful thought to their tax planning to minimise the chances of landing themselves a hefty tax bill.
"All eyes are now on what, if any, changes to IHT Chancellor Jeremy Hunt will announce in his first proper Budget on March 15. However, even if the IHT regime remains unchanged, many families will still be pushed into its scope given that the nil rate band and residence nil rate band have both been locked into place until at least April 2026. Many have also been brought into its scope by rising houses in recent years."
She added that families should look closely at the ways of reducing or eliminating IHT bills.
"Gifts you make to other individuals are generally not subject to IHT unless you die within seven years. There is also an annual gift allowance of up to £3,000 per tax year, and this will not be subject to IHT even if you do die within seven years.
"This £3,000 annual allowance can only be brought forward for one tax year, so if you have assets to spare you may want to consider using up this and last year's allowance before 5 April. Families should also ensure they invest in the most tax-efficient manner possible."
Just Group group communications director Stephen Lowe said: "The Chancellor has struck a seam of gold with recent inheritance tax receipts as he looks set to receive another record haul this financial year - and with more to come.
"Receipts are likely to race past official predictions for the next few years. The OBR forecast a tax take of £6.7bn for the current financial year rising to £6.8bn by 2025-2026 but with receipts averaging £588m a month this year, inheritance tax receipts are on track to exceed £7bn this year.
"The combination of frozen thresholds and property prices that have soared over the years means that receipts could continue to grow over the coming years.
"While it's good news for the Treasury there will be many people for whom an inheritance tax bill will be a nasty shock. These figures provide a reminder for people to assess the value of their estate regularly, taking into account an up-to-date valuation of any property they own.
"Professional, regulated advice can be invaluable to help work out the total value of an estate, calculate how much inheritance tax is likely to charged and understand what options are available to manage that tax bill."
