20 October 2023
If you are covering HMRC tax receipts, please find comment from Rosie Hooper, chartered financial planner at Quilter:
“Inheritance tax (IHT) receipts from April to September 2023 reached £3.9n, £0.4bn higher than the same period last year. This shines a light on why both political parties are currently making IHT a battleground policy in the run up to an election next year.
“This increasing revenue causes a conundrum for the government as IHT is an emotive tax that can split voters. Labour is rumoured to be looking at removing Business and Agricultural Property relief but by doing so they risk having a huge impact on the AIM market and damaging investment into UK plc.
“The Chancellor has extended the IHT threshold freeze until at least April 2028, and it is looking likely to rake in record amounts by stealth in the meantime. The problem lies in the fact that higher property prices have upped the number of households falling in the scope of IHT, and while growth has slowed in the housing market, we are still yet to see a significant drop in prices. The value of the average UK home now sits at almost £291,000 in August 2023 with that average much higher in the south of England.
“Frozen IHT thresholds form part of a broader fiscal drag strategy employed by this government, which has also frozen income tax thresholds, capital gains tax allowances, and dividend allowances in order to boost revenues. There is no doubt that IHT needs thoughtful reform but either political party needs to ensure that they do not create unintended consequences.
“The latest figures show receipts from PAYE income tax and national insurance payments for April to September 2023 were £201.2 billion which is £10.8 billion higher than the same period a year earlier. Given the threshold for the additional rate of income tax has reduced from £150,000 to £125,140, we can expect further rises in coming months.
“Financial planners can help people manage their tax affairs to optimise their money in this nuanced fiscal landscape and this is particularly true for taxes like IHT. The rules and restrictions surrounding aspects such as the residence nil rate band can be difficult to navigate, and with an increasing number of people facing unexpected IHT bills, speaking to a financial planner is key to ensuring you plan effectively and mitigate unnecessary costs.”
