Inheritance tax receipts hit record highs – how to legally reduce IHT bill in new tax year

Today (April 5) marks the end of the 2021/2022 tax year, with tomorrow (April 6) starting the new financial period. The most recent IHT statistics found that tax receipts hit a record high of £5.36billion for the period between April 2021 and February 2022. This is a notable rise from the previous record high seen in the 2018/19 tax year of £5.36billion and is £700million higher than the same period last year. Upon releasing the figures, HM Revenue and Customs (HMRC) noted that the increase in inheritance tax receipts could be partially attributed to the higher volume of wealth transfers that took place during the pandemic.

However, the tax body said this cannot be verified fully until the administrative data become readily available for scrutiny and analysis.

On top of this, while the IHT threshold remains frozen at £325,000, the value of many estates has only grown in value.

As a result more families are being pushed into paying inheritance tax and experts worry that many continue into the new tax year.

A recent Freedom of Information (FoI) request, conducted by financial firm Continuum, exposed that residential properties in the UK make up one-third of the value of assets held by estates which are potentially liable for inheritance tax.

Martin Brown, a managing partner at Continuum, believes there is a very good chance we will see IHT receipts rise once the last tax year’s statistics come out.

The financial expert cited the number of wealth transfers as being a potential factor in how inheritance tax will hit everyday families.

Speaking about the tax year’s end, Mr Brown said: “Whilst we all hope that the number of wealth transfers will begin to drop as the coronavirus pandemic enters a less deadly phase, for the remainder of the tax year we are likely to continue to see a high number of transfers.

“The high volumes of transfers combined with continuing rises in property values and more estates becoming liable to inheritance tax due to the freeze of IHT thresholds means we are very likely to see IHT receipts hit even bigger highs before the end of the tax year.

“As IHT receipts rise it shows how it is more important than ever for those hoping to pass on assets after they die to consult a good financial adviser.”

Mr Brown encouraged anyone who is concerned about how the pandemic has left them more vulnerable to inheritance tax to seek help from a qualified financial adviser.

He added: “We always encourage clients to include younger generations of their family in meetings to talk about estate planning and intergenerational wealth transfer.

“However, in the past two years we have seen a notable increase in the number of clients including their family in discussions with their Continuum adviser.

“The coronavirus pandemic has left clients thinking about their vulnerability and perhaps also a little more open to discussing estate planning with their family.”

Before the start of the new tax year, experts are also sharing how the public can reduce the risk of any potential inheritance tax bills, with many discussing the benefits of gifts.

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