21 March 2025
If you are covering the latest HMRC tax receipts and National Insurance contributions figures, please see the following comment from Shaun Moore, tax and financial planning expert at Quilter:
Inheritance tax haul continues to climb as fiscal drag intensifies
“HMRC’s latest figures reveal that inheritance tax (IHT) receipts from April 2024 to February 2025 now stand at £7.0 bn, which is £0.7 bn higher than the same period last year.
“The steady rise in IHT receipts has become an inescapable feature of the tax system. With the nil-rate band (£325,000) and residence nil-rate band (£175,000) frozen until 2030, the government has ensured that more estates are pulled into paying this deeply unpopular tax. Rising property prices, particularly in the South East, are compounding the issue, leaving many families unexpectedly liable for a 40% tax charge on inherited wealth.
“Further policy changes will only exacerbate the issues. Restrictions on Agricultural Property Relief and Business Relief from April 2026 could place additional strain on family-owned farms and businesses, while from April 2027, unused pensions will also fall within the scope of IHT. What was once a tax on the wealthiest estates is increasingly burdening middle-income families with no obvious route for mitigation.
“Despite repeated calls for reform, the government continues to rely on IHT as a growing source of revenue. Without intervention, the number of families caught in the IHT trap will continue to rise, forcing many to rethink their estate planning strategies.”
CGT receipts push higher as tax squeeze takes hold
“Capital Gains Tax (CGT) receipts for February hit £1.3 billion, bringing the total for the 12 months to February 2025 to £13 bn—slightly lower than last year’s figure of £14.5 bn.
“The government’s decision to slash the Annual Exempt Amount (AEA) to just £3,000—down from £12,300 two years ago—means that even relatively small disposals now trigger a CGT bill. Combined with last October’s rate increases, which saw basic rate CGT rise from 10% to 18% and higher rate CGT from 20% to 24%, this has led to an increase in tax paid on investment gains.
“The long-term trajectory of CGT revenues underscores its growing role in the Treasury’s tax strategy. A decade ago, CGT receipts stood at just £3.91 billion per year; today, they have soared to nearly £10bn more per year. Successive governments have used a combination of lower allowances and higher rates to steadily expand the number of people affected.
“However, the surge in CGT receipts may not be permanent. The higher rates create a strong incentive for investors to defer sales, avoiding tax where possible. If more taxpayers take this approach, future receipts could begin to slow despite the harsher tax environment.”
Income tax and NICs surge as threshold freeze bites
“PAYE Income Tax and NICs receipts for April 2024 to February 2025 are £384.9 billion, which is £12.6 billion higher than the same period last year.
“The driving force behind this increase remains fiscal drag. By keeping income tax thresholds frozen since 2021—and extending this freeze until 2028—the government is pulling more taxpayers into higher rates each year. As wages increase, many more earners find themselves paying 40% or even 45% on a portion of their income, generating billions in extra revenue without an explicit tax hike.
“National Insurance changes are also playing a role. While employee NICs were cut from 12% to 10% in January 2024, employer NICs will rise from 13.8% to 15% in April 2025, and the threshold at which businesses start paying NICs will be slashed from £9,100 to £5,000. These changes will increase employment costs, with potential knock-on effects on hiring and wage growth.
“With tax receipts consistently on the rise, careful financial planning is essential. Salary sacrifice arrangements, pension contributions, and other tax-efficient strategies can help individuals and businesses manage their exposure to the growing tax burden.”
