21 March 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:
“This morning’s HMRC figures show the Chancellor’s decision to freeze income tax thresholds is paying off – and that’s before the threshold for the additional rate of income tax is reduced from 6 April from £150,000 to £125,140. This stealthy fiscal drag effect has seen income tax and National Insurance payments from April 2022 to February 2023 rise to £344.3 billion, up £38.1 billion compared to the same period a year earlier.
“While this increase is significant, it is not surprising. The rising cost of living has triggered an uplift in pay, and many will have started paying income tax for the first time or moved into a higher rate as a result.
“Whether or not the forecasted drop in inflation to 2.9% this year comes to pass remains to be seen, but right now inflation remains in double digits and wage growth at 5.7% and will continue to be a boost for government coffers. With the additional rate threshold reduction now just weeks away, we will likely see a considerable jump in the tax take in the months to come.
“While the Chancellor made no real mention of personal taxes during his spring budget, having already made his announcements in November, he increased the pensions annual allowance by £20,000 meaning from 6 April people will be able to pay £60,000 a year into their pension. For those on the cusp of a higher tax band or looking to lower their income tax bill in general, seeking professional financial advice and exploring the option of paying more into their pension where possible could be highly beneficial.
Inheritance tax
“Alongside the continued rise in income tax take, inheritance tax (IHT) is also proving lucrative for the Treasury as more people reach the frozen IHT threshold. IHT receipts from April 2022 to February 2023 reached £6.4 billion, up £0.9 billion in comparison to the same period a year earlier.
“Given house prices are still yet to see the dramatic fall predicted, far more people who may not consider themselves wealthy could be caught by the IHT net as their property value has grown significantly in recent years. With more people facing an unwelcome – and in some cases unexpected – IHT bill, seeking professional financial advice where possible will be vital. IHT can be complex, particularly when it comes to the rules and restrictions of certain aspects such as the Residence Nil Rate Band, so professional support can help take the pressure off while also helping to mitigate costs through careful financial planning.”
