UK’s Think‑Tank Says Cutting Inheritance Tax Could Save Britons £5 Billion a Year
Final Duties, the country’s top probate brokers, have pulled apart the numbers behind the UK’s inheritance tax (IHT) to see what a ban would do to tax bills and public‑service funding. Their scoop?‑
- Switching IHT off would free up about £5 billion for taxpayers each year.
- Meanwhile, the cash that the Treasury would lose would be a sliver of 0.9 % of all tax revenue.
- And only 4 % of estates actually raise the tax, meaning the change would mainly touch the upper‑echelons of wealth.
The Numbers in a Nutshell
In the 2020‑21 tax year, the government pocketed a whopping £5.1 billion from IHT – over twice what the tax collected a decade earlier (£2.6 billion in 2010‑11). The jump is largely thanks to rising house prices: the tax kicks in on estates worth more than £325 k, and pushes the threshold to £500 k for direct descendants. As property values climb, more inheritances hit the tax line.
Regionally, the biggest hikes have been:
- North East – 153.8 % rise
- West Midlands – 137.4 %
- East Midlands – 126.3 %
- East of England – 120.3 %
- London – 111.7 %
Will the Loss Hit the Treasury Hard?
In 2023, IHT only made up 0.91 % of HMRC’s total receipts – a tiny slice that, while almost twice as high as the 0.59 % back in 2010, still represents a small part of the tax pie. Jack Gill, Managing Director at Final Duties, muses that a 0.9 % hit is unlikely to cripple public services – especially if the government can cover it with other revenue streams.
Why the Classic Tory Vote Might Cheer
For the incumbent Conservatives, announcing an IHT overhaul could serve as a “wow” move ahead of a looming general election. It “talks to the wealthy” and echoes the public sentiment that “a tax on your hard‑earned assets?” is unkind. At the same time, because the tax only applies to a tiny minority, it isn’t a huge carrot for most voters.
In short: popping the IHT could bring £5 billion back to households, cost the Treasury less than 1 % of its income, and tug at the right‑wing core. Whether it will be a day‑maker in debate rooms or merely a cushy headline remains to be seen.
