24 January 2023
If you are covering the latest HMRC tax receipts and National Insurance contributions statistics, please see the following comment from Shaun Moore, tax and financial planning expert at Quilter:
“Figures released today shine a light on why the government opted to extend the freeze to income tax thresholds up to 2027/28 in a bid to refill public coffers. Receipts from Income Tax and National Insurance payments from April to December 2022 reached £281.1 billion – an increase of £34.3 billion compared to the same period a year earlier.
“This upward trend is likely to continue as wage growth rises in light of inflation, but income tax thresholds stay static. A recent FOI submitted by us found that HMRC forecasts 1,130,000 more people will pay higher rate tax and 301,000 more people will become additional rate taxpayers by the 2027/28 tax year. This will ultimately mean many more people see their tax bills increase while actually not feeling much richer due to the eroding impact of inflation.
“However, this is just one stealth tax employed by the government recently, as it has also opted to freeze Inheritance Tax (IHT) thresholds to 2027/28 which some forecast could net the government more than £1bn. IHT receipts from April to December 2022 were £5.3 billion, an increase of £0.7 billion compared to the same period a year earlier.
“Runaway house prices and stagnant thresholds mean more people are dying with property wealth over the various inheritance tax allowances. Although house prices are expected to drop over the next year, recent data from Halifax revealed that over the past 40 years house prices have gone up a staggering +974% since early 1983. This means that many people have seen their properties go up enormously in value and while they might not consider themselves wealthy, they will end up paying inheritance tax which is typically viewed as a tax for the very affluent.
“Where possible, you should seek professional financial advice to help mitigate IHT costs through careful planning – particularly for the more complex areas such as the Residence Nil Rate Band which is not freely available and has restrictions on how and when it can be used.”
