Mounting speculation of Inheritance Tax changes to come

Newsletter issue – October 2024

As speculation mounts that the new Government will soon make changes to raise more money for the Treasury via Inheritance Tax (IHT), it seems we're already set for the highest receipts on record this year.

The latest HMRC stats show IHT receipts for April 2024 to August 2024 are £3.5 billion. That's higher by £0.3 billion compared to the same period last year.

With the Budget fast approaching on 30 October - the new Chancellor Rachel Reeves' first chance to stamp her authority on the public finances - there's a lot of chatter about IHT being one of the headliners.

What exactly might change? Could the existing favourable treatment for agricultural and business property come to an end? At the moment these types of properties gain tax relief of either 50% or 100% of the value of the assets.

Another element that may be tinkered with concerns what is sometimes referred to as a 'double benefit' loophole surrounding IHT and CGT and revaluation on death. Often, when an asset is passed down to a beneficiary, its value is raised to market value. In turn, that cuts the amount liable to CGT.

Some political commentators have also suggested that residential nil rate band may also be tweaked. Will the Government cut or lower it? Right now, if homeowners leave their main home to their children, they can increase their nil rate band by up to £175,000, or £350,000 if they are a couple. Gifts made to individuals could also be another area where the Treasury tinkers. At the moment these are exempt from IHT seven years before a person dies.

The previous two tax years have set a record high for IHT receipts with £7.5bn in 2023/24 and £7.1bn in 2022/23.

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