Inheritance Tax soars as stamp duty slump continues

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, comments on the publication of the latest HMRC tax receipts and NI contributions report, showing Inheritance Tax soars as stamp duty slump continues.

Key points from publication:

• • Inheritance Tax (IHT) receipts for April 2023 to September 2023 are £3.9 billion, which is £0.4 billion higher than the same period last year.
  • IHT receipts are being pushed higher by a combination of frozen tax thresholds and increased interest on late payments.
  • A slowing housing market, and probate delays, mean you may incur these late payments as it takes longer to sell a home to pay an IHT liability.
  • Stamp tax receipts for April 2023 to September 2023 are £7.7 billion, which is £3.0 billion lower than the same period last year.

Helen Morrissey says:

“HMRC remains on course for another record year for IHT, as receipts continue to soar skyward.

“It’s a heady mixture of tax thresholds that have been frozen for years which drag an ever-increasing number of families into paying it.

“Added to this, a recent increase in interest rates on late payments are pushing up what could already be a large bill. It’s a complex area that really contributes to IHT’s reputation as the nation’s most hated tax.

“Under the current rules, you must pay inheritance by the end of the sixth month after the person has died.

“After this point you will be charged interest on any outstanding amount.

“Unwinding someone’s estate can be a complicated process and for many people it will take longer than six months particularly if you add in things like delays with probate.

“If your primary asset is a house that needs to be sold to foot the bill, you can’t start doing this until you get probate, so there’s every chance the whole process could take much longer than six months, particularly in the current market. It means you could be faced with paying these interest charges until you can sell.

“Current property market woes may mean it is taking longer to sell, but cooling house prices may also have the effect of taking some families out of the inheritance tax trap.

“Soaring house prices in recent years have contributed to many people, often unexpectedly, incurring an IHT bill, so there’s a chance that as prices come off the boil, properties that pushed estates just over the threshold may now come under it.

“Stamp tax receipts were down significantly on the same period last year as the housing market slows.

“It’s also affected by the fact that the stamp duty thresholds were hiked on 23 September last year, so looking back a year, the tax take was always going to be lower.

“This change will fall out of the figures next month, but with the cost-of-living crisis continuing to keep a firm grip on our finances and current high mortgage rates showing little sign of budging, we may not see any significant improvement any time soon.”

Kindly shared by Hargreaves Lansdown