Reeves rakes in record £2.2bn from ‘death tax’

Oct 23, 2024

The Chancellor raked in a record £2.2bn in inheritance tax receipts in the three months to September, ahead of an expected raid in Rachel Reeves’s maiden Budget next week.

Inheritance tax brought in £736m for the Chancellor last month alone, according to the Office for National Statistics (ONS), taking the haul so far this financial year to almost £4.3bn – up more than 10pc compared with the same period last year.

Ms Reeves is reportedly considering a string of changes to the much-hated “death tax” which is typically charged at a rate of 40pc on assets above the threshold of £325,000 when someone dies.

She is understood to be considering extending the current “seven-year” rule – under which gifts can be passed on free of inheritance tax – to 10 years and is yet to rule out the scrapping of relief for Aim shares.

Exemptions for businesses and agricultural land are also expected to be removed. These were designed to allow farmers pass on land, but critics argue they are being used as a loophole by the wealthy to reduce their estate’s liability on death.

Sarah Coles, the head of personal finance at Hargreaves Lansdown, said: “Even if the Government makes no changes at all, we’ll continue to face ever-higher tax bills, thanks to frozen income tax and inheritance tax thresholds and a slashing of the capital gains tax and dividend tax allowances.

“And Rachel Reeves has no intention of leaving things there. The need for more cash to fill the black hole in the Government’s finances could push up any of these taxes.”

Inheritance tax revenues are heavily affected by the value of assets, many of which have broadly risen over the past year.

The FTSE 100 has surged by 12.5pc over the past year, while house prices increased on average by 2.8pc over the year to August.

Those assets can also be subject to other taxes.

Stamp duty land tax, charged on purchases of homes, brought in £1.2bn last month, up from £1.1bn in September 2023.

Stamp duty on shares raised £263m, an increase of £40m on the same month of last year.

Capital gains tax, charged on the profit made when investments are sold, brought in £192m for the Exchequer, up by 16pc on the year.

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