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Inheritance tax intake rises sharply but stamp duty falls again

Nick Cheek
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Nick Cheek

The much-debated (and, in many cirlces, much-hated) inheritance tax (IHT) is, once again, filling the Government’s coffers while stamp duty receipts have fallen for the thrid month in a row.

According to figures from HMRC, Receipts for inheritance tax (IHT) over the same period came to £1.2bn, a £100m uptick on the same period a year earlier. Most exprts noted that more and more people were being pulled into the IHT ‘net’.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Inheritance tax receipts continue to surge – up £100m on this time last year in a sure-fire sign that frozen thresholds are continuing to drag more people into its net.  

“There are plenty of ways people can mitigate this tax – we have a £325,000 nil rate band, extra allowances when it comes to passing down the family home to close family members as well as a series of gifting allowances, but they have been no match for surging house prices which have pushed many people’s estates into IHT territory. Given many of these allowances and thresholds have been frozen for years perhaps now is the time to look at whether they should be raised to give people some relief.” 

Andrew Tully, technical director, Canada Life, also noted that ‘with the right planning, IHT can be a largely discretionary tax. But many people have found themselves being dragged into the IHT tax net through the growth in house prices, combined with the freezing of the tax bands.

“Using trusts and gifting, combined with the right retirement income strategy, can all help minimise the value of your estate when it comes to calculating any IHT liability, ensuring it can be passed on to your beneficiaries as efficiently as possible.

Meanwhile, Rachael Griffin, tax and financial planning expert at Quilter, said the recent figures woudl mean that the Chancellor is likely to resist reforming tax rules. 

Earlier this month, former Chancellor and Tory MP Nadhim Zahawi said IHT should be scrapped and described it as “morally wrong”. This led to a debate as to whether the tax should be reformed instead. 

Griffin added: “The 2022/23 IHT take reached a record-breaking £7.1bn, and if the tax take continues to grow at its current pace, we can expect these figures to reach new highs again. 

“While IHT is not the Government’s most lucrative tax, it has increased significantly in recent years as frozen thresholds and higher house prices led to more people being caught by in its net. Abolishing it altogether would punch a hole in the budget, compounding an already bleak economic outlook.” 

Stamp duty on the downturn

The tax intake for stamp duty and annual tax on enveloped dwellings (ATED) dropped by £1.1bn to £2.4bn in April and May this year. Data from HMRC showed that the majority of this was due to a £900m decline in stamp duty receipts driven by lower transaction levels and a lower rate of taxation. 

The stamp duty nil rate threshold was raised from £125,000 to £250,000 in September, meaning property transactions under this amount will not be liable to pay the tax. This tax break will remain in place until March 2025. 

Hargreaves Lansdown’s Morrissey said: “After years of flying high, stamp taxes took a dive – down £1.1bn on the same period last year. More generous relief will have played a part, but much of the fall is driven by housing market woes.  

“A toxic mix of the cost-of-living crisis and surging mortgage rates has dampened demand in this once surging market. With interest rates on the rise and mortgage deals being taken off the table there’s little chance of seeing a bounce back in demand any time soon.”