Inheritance tax liabilities rise 5% to top £7bn

IHT liabilities have risen 5% to more than £7bn, according to the latest official figures published today, with the proportion of deaths resulting in an IHT charge rising to 4.72%, the highest level since 2006-7.

The new figures show that the total number of UK deaths that resulted in an IHT charge was 30,400 in 2023-24, the most recent year for which data is available.

The rise in liabilities is attributed to a combination of higher volumes of wealth transfers following IHT-liable deaths, rises in asset values and the continued freeze of the IHT tax free threshold at £325,000 and up to £175,000 for the residence nil-rate band.

The average effective tax rate paid by taxpaying estates was 13% due to a combination of exemptions, reliefs and tax-free allowances.

Commenting on the figures, Elsa Littlewood, a private client services tax partner at BDO said:

"The proportion of UK deaths resulting in IHT continues to rise - and may rise further when the impact of the recent changes to Business Relief and Agricultural Relief are recognised in the figures.

"Under current legislation, from April 2027 most unused pension funds and death benefits are expected to fall within the scope of IHT, meaning more of an individual's estate will be potentially subject to tax.

"Speculation on possible tax changes arising from the change of leadership is also giving families looking to pass on their wealth to the next generation a lot to think about.

"Now may be a good time for them to review their succession plans and consider whether existing arrangements for passing wealth between generations remain appropriate.

"Under current rules families are able to gift assets in a way that is potentially exempt from IHT if the donor survives for seven years from the date of the gift.

"Under current rules families are able to gift assets in a way that is potentially exempt from IHT if the donor survives for seven years from the date of the gift.

Read this article for a full explanation of IHT and how it works.

ENDS

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