Dreaded ‘death tax’ receipts rose to £2.1 billion for the first three months of the new tax year as part of a wider raid on incomes and the estates of the nation.
The government’s take from inheritance tax was up by £83 million on the same period last year.
The increase came at the same time as the new Labour government is under pressure to shake up the inheritance tax regime to raise billions more – potentially an extra £9billion a year – to fund public services.
The figures were released by HMRC, which also revealed big increases in the amount being raised by the government through income tax, capital gains tax and National Insurance.
The total tax take soared to £108.3 billion for the April to June period, which was up by £1.9 billion on the same period last year.
The major factor behind the increase was the failure to raise income tax thresholds on wages, which means more people are paying tax or being dragged into paying higher rates of tax at 40 percent and 45 percent.
Total government income from inheritance in the last tax year was £7.3 billion, but ministers are under pressure to make changes that could see this figure more than double.
Nicholas Hyett, Investment Manager at Wealth Club, said: “Inheritance tax remains a political hot potato.
“The new government has promised not to raise a whole host of taxes, but inevitably there are spending pledges that need to be met. That means those taxes that haven’t been officially ringfenced, including inheritance tax, are firmly in the spotlight.
“Reforms to non-dom rules are one potential source of an inheritance tax windfall, but with an estimated £100 billion being passed on in inheritances and gifts in the UK each year, there’s probably more in play if the government is determined to raise extra cash.”
Looking at the wider tax grab, Helen Morrissey, head of retirement analysis, Hargreaves Lansdown, said: “The tax take continues to soar.
“National Insurance rates may have been slashed but even this hasn’t stopped the upward momentum – receipts for income tax, capital gains tax and National Insurance are up £1.9bn so far this tax year. Inheritance tax receipts are also on the way up.”
She went on to say: “This is largely down to frozen tax thresholds. These sound less scary than tax rises but, over time, they are hugely effective at pulling more people into paying more tax. With these threshold freezes in place until 2028 we will see our budgets squeezed for some time yet.”
She then added: “We’ve also seen some tax hikes. The allowance for capital gains tax has been slashed to £3,000 for this tax year. This is the latest in a number of hikes to this tax– as recently as 2022/23 the same allowance stood at £12,300.
“With the new Labour government expected to announce the date for its first Budget in the coming weeks, speculation is swirling that we may see more painful tax rises to come.”
She also said there are things people can do to protect their money.
“Savings held in ISAs and SIPP aren’t liable to capital gains tax and so are a very tax efficient way of making the most of your money,” she said.
“It’s also worth saying that SIPPs aren’t usually subject to inheritance tax – this is a tax that has been on the rise in recent years with frozen thresholds pulling more and more people into its net.
“If assets such as our home and savings are worth more than the IHT nil rate band (currently £325,000) and the residence nil rate band (£175,000), then our families could get hit with a bill. However, with inheritance tax is not levied on SIPPs and pensions in most cases it can be a tax efficient way to pass money on.
“If you die before the age of 75 then your beneficiaries wouldn’t pay income tax on it either, though they would if you were over 75.
“It’s a rule that brings essential peace of mind to know that your family won’t be left struggling should you die unexpectedly. However, there are many who believe the treatment is overly generous and we could see tweaks made in the coming years.”
