21 July 2023
If you are covering HMRC tax receipts and National Insurance contributions, please see comment below from Shaun Moore, tax and financial planning expert at Quilter.
“Rumours circulated at the weekend that talks are being held at No 10 over whether to abolish inheritance tax ahead of the next general election. However, this morning’s HMRC tax and national insurance receipts illustrate a growing tax take that the government may be reluctant to forgo.
“Today’s figures report IHT topping up government coffers by £2 billion in the period from April to June 2023, which is £0.2 billion higher than the same period a year earlier. The 2022/23 IHT take hit a record-breaking £7.1 billion, and we can expect this figure to be easily surpassed if the tax take continues to rise at the current pace.
“IHT is often touted as one of the most hated taxes in Britain, but people should be careful what they wish for when calling for it to be axed. IHT is not the government’s most lucrative tax, but it has increased considerably in recent years as a result of frozen thresholds and higher house prices, so if it were to be scrapped we could expect something to appear in its place in due course. A replacement could be a more punitive wealth tax that sees people’s hard-earned money taxed in life rather than after they have passed.
“While scrapping it in its entirety may not be the way to go, IHT is still ripe for reform and the Conservative government is running out of time to drum up support. As such, it may look to gain favour through changes framed as helping more Brits pass on wealth to support the younger generation. There are various ways in which they could do this but the simplest would to revise the IHT threshold by absorbing the residence nil rate band into the standard nil rate band and increasing it in line with inflation, or by simply cutting the 40% rate.
Income tax and national insurance payments
“Elsewhere, the data show receipts from PAYE income tax and national insurance payments for April to June 2023 were £104.5 billion – a significant £5.9 billion increase compared to the same period a year earlier. The lowering of the threshold for the additional rate of income tax to £125,140, coupled with frozen income tax levels, have seen a continued uptick in tax take thanks to fiscal drag.
“Seeking professional financial advice is key when it comes to managing your money in the most tax efficient way, particularly for more complex areas such as inheritance tax. 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 professional financial planner is key to ensuring you plan effectively and mitigate unnecessary costs.”
