HMRC has released the Inheritance Tax liabilities statistics for the tax year 2021–2022, and it is clear that the number of estates now suffering IHT charges is only continuing to grow. Although these statistics relate to a period now a few years ago, there is a clear trend which we assume (if there are no significant moves by the government to change the situation) will continue on a similar trajectory.

The key points for 2021- 2022:

1. 4.39% of UK deaths resulted in an IHT charge, an increase of 0.66% compared to the previous year.
2. There were 27,800 taxpaying IHT estates, an increase of 3% compared to the previous year.
3. IHT liabilities were £5.99bn, an increase of 4% compared to the previous year.
4. The largest exemption set against assets continues to be the spouse exemption. £15.5bn was transferred to surviving spouses and civil partners, a fall of 1% compared to the previous year.
5. The combined value of agricultural property relief (APR) and business property relief (BPR) was £4.4bn, an increase of 5% compared to the previous year (although the amount of BPR claimed decreased, the amount of APR claimed increased).
6. Exempted charitable transfers increased to £2.1bn from £1.8bn the previous year.

It’s not surprising that the number of estates affected by IHT is increasing given the standard IHT nil rate band of £325,000 has not changed since 2009. The natural consequence of the nil rate band not keeping pace with inflation is that more estates become subject to IHT (and IHT bills increase). The Conservative government confirmed in March 2021 and Autumn 2022 that the nil rate band would remain at current level until April 2028 (as will the current residence nil rate band which can provide an additional £175,000 IHT free if certain conditions are met). It remains to be seen what changes to IHT will be announced by the new Labour government in its upcoming Budget, but given what we know about the Chancellor’s drive to raise tax revenue and what she has said about the “black hole” in the country’s finances, we don’t expect to see any good news on this front.

It is interesting to see the BPR/APR statistics, especially in light of the current expectation that these reliefs will be curtailed by Labour following recommendations by the Institute for Fiscal Studies (IFS calls on the government to scrap or cap fundamental IHT reliefs to raise revenue, Rosie Todd (stevens-bolton.com)). In 21/22 BPR was valued at £2.9bn and was used by 4,170 estates, and APR was valued at £1.6bn, used by 1,730 estates. Again, and confirmed by these latest figures, these reliefs seem easy targets for a Chancellor looking to raise tax revenue. 

Inheritance Tax liabilities statistics: commentary - GOV.UK (www.gov.uk)