Inheritance Tax (IHT) statistics released by HMRC today show:
Our partners share their thoughts on today’s statistics:
Whille Inheritance Tax (IHT) has generated more than £5bn in each of the last three tax years, it remains a very small part of the total revenue collected by HMRC.
To be more specific, the total IHT paid in 2019/20 (at £5.125bn) represented less than 1% of the total tax take for the UK (£602.155bn). That is not to say that a figure of £5bn wouldn’t be missed but in the grand scheme of things, this is a tax that receives more attention than, for example, income tax, which generates £194.273bn in revenue, National insurance (143.050bn) and VAT (£130.149bn).
It must, therefore, be acknowledged that IHT is more of a policy tax and political tool than a revenue raising strategy. Indeed, so few estates pay the tax that it would hardly be a vote-loser if the rate was increased. If anything, such a proposal would be a politically positive step.
There has been much talk of possible reform to IHT but let’s not forget that the Chancellor’s predecessor Savid Javid went on record during at the Tory Party conference last year saying that he could consider scrapping the tax completely.
So what is the future of IHT? My personal view is that, if the Treasury is seriously considering an annual wealth tax, this would provide the perfect opportunity to not just reform IHT but do away with it completely. Politically, the Government would be seen to be continuing to tax wealthy estates, albeit in a different format and if a wealth tax is deemed necessary, it will be more acceptable to those exposed to it if they were to be excused from their current exposure to IHT.