Inheritance tax and HMRC statistics

Care is therefore needed. Not all the facts are shown by statistics.

The latest complete HMRC figures for inheritance tax (IHT) are for the tax year 2021-2022, which it will be remembered, would have been affected by the Covid pandemic. Here are some of the statistics with commentary which attempts to put some of the numbers into context.

• 1. Only 4.39% of deaths result in any inheritance tax being paid. In other words, 95% of estates did not pay any inheritance tax at all, not even £1. This should be borne in mind when looking at what is generally considered the most hated UK tax. However, since there is no tax on the first death if the estate is left to spouses or civil partners, a better statistic might be to say that just under 9% were affected by the tax and 91% were not.
• 2. Government revenue from inheritance tax in 2021-2022 was £5.99 billion. In contrast, in 2024-25 (admittedly, several years later) revenue from income tax is expected to raise over £300 billion, representing 26% of all receipts. Inheritance tax is such a minnow in contrast, but it would appear to be too expensive politically to be abolished altogether.
• 3. Inheritance tax is also paid on transfers into trust. Over the last ten years, on average, £60m is put into trust by the public annually but each year fewer than 100 of those contributions pay any tax. The tax threshold of £325,000 per transfer into trust will be a factor, as will the availability of generous reliefs (curtailed in the last budget) for business and agricultural property.
• 4. More inheritance tax was taken from women’s estates than from men’s. False conclusions might be that women are better off generally in the UK, or that men are cannier. A more likely explanation continues to be women’s increased longevity i.e. for a couple, the tax bill usually only hits when the second dies, and that is typically the wife.
• 5. In order of size, most tax was saved by the following reliefs:
  • Spouse/civil partner exemption – £15.5 billion
  • Agricultural property relief and business property relief – £4.4 billion
  • Charity relief – £2.1 billion
• 6. The number of estates paying tax continues to be lower than in 2006-07, in spite of the nil rate band having been frozen at £325,000 since then. This seems surprising given that house values and assets generally have continued to rise in value. The explanation is the introduction, for political reasons, of the transferable nil rate band in 2007 and subsequently, the residence nil rate band in 2017.

However, in life, not everything is shown by statistics. There is the human side. It does seem beyond question that there is a big and potentially sad story evolving over the place of farms and farmers in our society. A relatively small amount of tax raised will arguably cause a disproportionately large amount of permanent upheaval for working farming families.