Receipts from Inheritance Tax (IHT) in February totalled £531 million, bringing in a record for the tax year so far at £6.4 billion.
The total amount for the year was £66 billion higher than the same period last year, with receipts from April 2022 to February 2023 hitting £722.6 billion.
Overall, IHT receipts hit a record £6.4 billion for the 2022/23 tax year, up £900 million from the £6.1 billion a year earlier.
More cash for pensions
However, changes announced by Chancellor Jeremy Hunt in the March Budget could affect IHT receipts in the future.
The abolition of the Lifetime Allowance (LTA) and the £20,000 increase to the Pension Annual Allowance in the Budget, can affect IHT and the passing on of pensions.
When passing on a pension pot, IHT typically does not apply, unlike other investments, as it is typically not considered part of a taxable estate.
Unlimited amount
The abolition of the LTA means a potentially unlimited amount of money can be placed in a pension pot tax-free, while the expansion of the annual allowance means savers can grow their pot by £60,000 a year without a tax charge.
A report in the magazine, MoneyAge, said Jeremy Hunt’s changes mean that from April, couples could put up to £120,000 a year tax-free into their pension depending on their earnings.
Investment opportunities
The report quoted an analysis by insurance firm NFU Mutual, that showed that if an individual was to put £60,000 into a pension from 6 April, and then a further £60,000 for each of the next 10 years, they could build up a pot of £812,298, assuming four per cent growth after charges compounding monthly.
This would normally be free from IHT, providing an IHT saving of up to £324,919.
If two people were able to invest in their pension that way, they would have a total of £1.62m to leave free from IHT, giving them a saving of up to £649,838.
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