The latest HMRC Inheritance Tax Statistics, highlighted in an article published by the Society of Trust and Estate Practitioners (STEP), show that UK inheritance tax (IHT) liabilities exceeded £7 billion for the first time during the 2023/24 tax year.
According to the figures, inheritance tax liabilities reached £7.03 billion, representing a 5% increase compared with 2022/23.
Interestingly, the increase in tax collected came despite a reduction in the number of estates paying inheritance tax. HMRC reported that 30,400 estates incurred an IHT charge during 2023/24, a 3.6% decrease on the previous year. Overall, only 4.7% of UK deaths resulted in an inheritance tax liability, while the average effective tax rate paid by chargeable estates was 13%.
The annual statistics provide a comprehensive overview of estates and trusts liable to inheritance tax, including the use of exemptions and reliefs, together with the composition of assets held within estates. Importantly, the figures are recorded according to the year of death, rather than the year in which the tax is ultimately paid.
HMRC’s analysis also highlights the continued importance of inheritance tax exemptions. Transfers between spouses and civil partners remained the most widely used exemption, reflecting the long-established rule that assets can generally pass between spouses and civil partners free of inheritance tax. During the year, this exemption was claimed by 5,560 estates with values exceeding the nil-rate band.
The statistics also demonstrate the continued significance of inheritance tax reliefs for business and agricultural assets. The combined value of Business Property Relief (BPR) and Agricultural Property Relief (APR) increased to £5.96 billion, representing a 13% increase year-on-year. Of this total, Business Property Relief accounted for £3.85 billion, up 15%, while Agricultural Property Relief increased to £2.11 billion, an increase of 9%.
In addition, the value of transfers exempted because they were left to qualifying charities rose slightly from £1.92 billion to £1.94 billion, demonstrating the continued use of charitable giving within estate planning.
Although only a relatively small proportion of estates incur an inheritance tax liability, the latest figures demonstrate that inheritance tax continues to generate significant revenue for the Exchequer. They also underline the importance of understanding the available exemptions, reliefs and estate planning opportunities when preparing for the future.
How Smart Probate Can Help
Inheritance tax and probate often go hand in hand. Planning ahead can help ensure that available exemptions and reliefs are considered, while obtaining professional advice during the administration of an estate can help executors meet their legal and tax obligations.
If you would like advice on inheritance tax, estate planning or probate, contact Smart Probate today. Smart Probate is authorised by the ICAEW to provide probate services, and our team includes Chartered Tax Advisers, providing expert guidance on both probate and inheritance tax matters.