26 April 2023
If you are covering the latest HMRC tax receipts and National Insurance contributions statistics, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:
“The latest figures from HMRC show that the inheritance tax (IHT) take continues to march ever higher as frozen tax thresholds and elevated house prices see more people caught by the IHT net.
“The Chancellor’s extended IHT threshold freeze is already raking in a significant amount by stealth. IHT receipts from April 2022 to March 2023 reached a record breaking £7.1bn, far surpassing the £6.1bn inheritance tax take in the 2021-22 tax year with a £1.0bn increase.
“Historically IHT was viewed as a tax only for the very wealthy. However, with house prices remaining at such elevated levels while both the nil rate band and residence nil rate band are frozen until 2028, many families that might not consider themselves to be wealthy could find themselves facing an unexpected IHT bill.
“The ever-increasing tax revenue from IHT presents a conundrum for the government as we approach election season. Rumours are already rife regarding potential crowd-pleasing policy changes the government might enact to improve their chances of winning the next election. Some reports suggest inheritance tax may be ripe for reform, but considering it is becoming a powerful revenue generator, this government might find the prospect of lowering one of Britain's most hated taxes a bitter pill to swallow. However, on the other hand, it is likely to drum up support.
“Elsewhere, the latest figures show receipts from PAYE income tax and national insurance payments for April 2022 to March 2023 were £378.2bn – up a huge £40.2bn compared to the same period a year earlier. Given the threshold for the additional rate of income tax has now reduced from £150,000 to £125,140, we can expect this figure to rise even further in the coming months.
“With income tax levels also frozen until 2028, thanks to fiscal drag, more people will move up the income tax bands as their pay increases and government coffers will see a considerable uplift as a result. Given inflation is still in double digits, we can expect wages to continue rising further, and this upward trend in government tax take will therefore continue due to the static thresholds.
“With unwelcome IHT bills rapidly becoming more commonplace, seeking professional financial advice is all the more important. IHT is a complex area of financial planning, particularly when it comes to the rules and restrictions of certain aspects such as the residence nil rate band, so professional support can help you plan appropriately and mitigate costs.”
