Inheritance tax receipts have risen again as experts are warning Brits to better plan for the passing on of wealth, after the Autumn Budget changes.
Fresh figures released this morning show inheritance tax receipts for between April and October of this year are £5bn, which is £500m higher than the same period last year.
This comes after sweeping changes were made to inheritance tax by the government in the Autumn Budget. Inheritance tax is applied at a flat rate of 40 per cent on estates worth over £325,000.
New rules included changes to inherited pension pots, which will be subjected to inheritance tax from April 2027, as well as a cap on relief on the inheritance of agricultural land and family businesses, both of which can be passed on tax free under current rules.
The tax relief available on inherited AIM shares was also set at 50 per cent “in all circumstances”.
The Chancellor also confirmed that she was extending the freeze on thresholds until 2030. The threshold freeze was due to expire in 2028.
This week, more than 10,000 farmers took to Westminster to protest against the changes, which many claimed would decimate the sector.
Monthly receipts patterns in each financial year since 2021 to 2022 and shows: the higher receipts in June 2022, November 2022, June 2023, and October 2023 can be attributed to a small number of higher-value payments than usual
“More tax is likely to stifle growth further”
Following this morning’s figures, Alex Davies, chief executive and founder of Wealth Club said the tax “was already an absolute cash cow” but the “extreme changes announced in last month’s Budget which badly affect farmers, business owners, pension policyholders and investors, mean these figures are only going to increase over the coming years.”
We believe all the changes to inheritance tax made in the Budget are extremely short sighted”, citing concerns about the tax burden and low levels of growth, saying “more tax is likely to stifle growth further.”
Davies added that the changes “have given those affected no time to plan. It’s very much a case of “one day, that’s your money, the next day, it’s not”.
The changes to inheritance tax in the Budget have also led to criticism from business leaders.
Industry leaders warned there will be an influx of for-sale signs on UK businesses, with food and farming sectors particularly concerned.
One of the most prominent critics was Sir James Dyson, who branded Reeves’ first Budget “ignorant” and “spiteful” as he accused her of “killing off family businesses, individual aspiration and economic growth”.
Entrepreneur Ranjit Singh Boparan, whose empire ranges from Bernard Matthews to Carluccio’s, has warned the Autumn Budget is a “disaster for business” and will “deliver a final fatal blow to the thousands of small family-owned farms”.
Meanwhile, the changes were branded an ‘existential threat’ to the future of seventh-generation pub and brewing giant, Manchester-based JW Lees. Its owner William Lees-Jones warned he is now “facing the very real prospect that we will never be able to hand on the running of my business to our children”.
‘IHT receipts are likely to keep rising’
Jonny Black, chief commercial and strategy officer at abrdn, said: “IHT receipts are likely to keep rising, given the extension of the IHT threshold freeze at the Budget and the government’s proposed plans to bring pensions into its scope.
“If people haven’t made plans for passing on their wealth, it’s even more important that they do so now. And if they did have plans, they may need to revisit them.”
When we polled advice professionals ahead of the Budget, one in five said the pensions IHT change would be one of the most disruptive things the Chancellor could do for existing strategies.”
Rachael Griffin, tax and financial planning expert at Quilter, added that the “consistent upward trend underscores the government’s rationale for freezing the IHT threshold until 2030. However, incorporating pensions into the taxable estate from April 2027 will turbo charge this data.”
“Farmers are also likely to start to bolster these figures as Agricultural Property Relief (APR) is made less generous. These changes mean more farmers may face higher IHT liabilities, potentially forcing difficult decisions about the future of family-owned farms.”
She added that “similarly, the tightening of reliefs for AIM shares and Business Relief (BR) will also raise more for government coffers. These various changes are likely to drive greater urgency in estate planning, as taxpayers seek to navigate a landscape where traditional reliefs and exemptions are gradually eroded and new financial plans need to be laid.”