Rachel Reeves will 'no doubt' target one particular HMRC tax in Budget

Chancellor Reeves, from the Labour Party government, could target IHT in October.

HMRC has raked in an extra £300m for inheritance tax - sparking fears Rachel Reeves will "no doubt" target the levy in the forthcoming Autumn Statement. Chancellor Reeves, from the Labour Party government, could target IHT in October.

New figures from HM Revenue and Customs have shown that £3.5billion was collected between April and August 2024. The HMRC data marks an eye-watering £300 million increase year-on-year, experts have correctly pointed out.

Shaun Moore, a tax and financial planning expert at Quilter, warned the rise will "no doubt stoke the rumours and debates about whether the tax will be increased ahead of Labour's first budget". Moore continued: "There is a strong argument for simplifying the IHT system and making it more appealing to gift during one's lifetime. The complexity of the current system often leads to confusion and inequities."

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Experts say she may target loopholes, such as the tax break on AIM shares, which currently allows them to be passed on tax-free if held for at least two years before death. Laura Hayward, Tax Partner at Evelyn Partners, warns receipts may not be increasing fast enough to fill the Budget shortfall.

Moore added: "Increasing the gifting threshold would encourage earlier wealth transfer, reducing future IHT liabilities, and could boost consumer spending". Andrew Tully, technical services director at Nucleus, proposes potential changes such as "scrapping or updating the rules on agricultural land".

Moore suggested that a simpler system could "reduce the administrative burden for both taxpayers and HMRC, while also making it fairer". HMRC showed a significant rise in IHT liabilities on gifts made within seven years of death.

The number of estates that paid IHT on these gifts more than doubled from 590 in 2011/12 to 1,300 in 2020/21. Similarly, the total IHT paid on these gifts increased by 153%, rising from £101m to £256m over the same period.