21 February 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 receipts climb once again
“HMRC’s latest figures show that inheritance tax receipts for the period of April 2024 to January 2025 are £7.0 billion, up by £0.7 billion compared to the same period last year.
“This relentless rise in inheritance tax receipts is baked into government policy. With the nil-rate band (£325,000) and residence nil-rate band (£175,000) frozen until 2030, more and more families are being dragged into paying the tax. Rising house prices, particularly in the South East, mean many people that don’t consider themselves to be wealthy will now find themselves above the threshold and facing a 40% tax bill.
“Farmers and business owners are also feeling the pressure. The upcoming reforms to Agricultural Property Relief and Business Relief could force more family farms and small enterprises into difficult decisions about their futures. A tax once aimed at the wealthiest estates is now creeping further into the middle class, and with unspent pensions set to be taxed from April 2027, the government’s IHT windfall is only set to grow.
“Inheritance tax remains one of the most resented taxes in the UK, yet the government is changing policy so more people than ever will pay it. Without reform, families will continue to find themselves hit with unexpected tax bills on what they hoped to pass down.
CGT receipts surge as tax changes bite
“Capital Gains Tax receipts hit £10.28 billion in January, marking yet another increase as taxpayers adjust to the harsher tax environment. In the 12 months to January 2025, total CGT receipts have now reached £14.56 billion, similar to the £14.59 billion collected in the same period last year.
“This trend is being driven by two major forces: the reduced Annual Exempt Amount (AEA) and the increase in CGT rates, which came into effect in October 2024. With the AEA now just £3,000, down from £12,300 two years ago, fewer gains escape tax, and more investors are finding themselves liable for CGT—even on relatively modest asset sales.
“The rise in basic rate CGT from 10% to 18% and higher rate CGT from 20% to 24% has further squeezed those looking to cash in on investments. As a result, many investors have rushed to sell before the changes fully settle in, pushing receipts higher.
“Further analysis shows that CGT receipts have increased by 271% over the past decade, from £3.91 billion in 2013-14 to £14.49 billion in 2023-24. This dramatic rise highlights how CGT has become an increasingly lucrative source of revenue for the Treasury, with successive governments gradually pulling more taxpayers into its net through lower exemptions and higher rates.
“However, this wave of disposals may not last. Higher tax rates create an incentive for ‘tax lock-in,’ where individuals hold onto assets rather than triggering a CGT charge. If that happens, the Treasury’s current CGT windfall may prove short-lived.”
PAYE and NICs continue to boost Treasury coffers
“HMRC's latest figures reveal that PAYE income tax and National Insurance contributions (NICs) receipts totalled £349.1 billion from April to January 2025, an increase of £10.3 billion compared to the same period last year.
“This surge is largely driven by frozen income tax thresholds, which have remained unchanged since 2021 and are set to stay in place until 2028. As wages rise, more earners are being dragged into higher tax brackets, a phenomenon known as fiscal drag, resulting in a greater portion of income being taxed at 40% or even 45%. Without an explicit tax rise, the government is collecting more from taxpayers each year simply by keeping thresholds static.
“National Insurance changes have also played a role. Employer NICs are set to rise from 13.8% to 15% in April 2025, and the threshold at which employers start paying NICs will drop from £9,100 to £5,000. These changes will increase costs for businesses and potentially affect wages and hiring decisions.
“While a cut to employee NICs from 12% to 10% was introduced in January 2024, the overall tax burden remains historically high. Many taxpayers will see little relief as frozen thresholds and rising wages continue to push them into paying more tax.
“With PAYE and NICs receipts climbing each month, strategic financial planning has never been more important. For those looking to mitigate their tax burden, options such as salary sacrifice arrangements and increasing pension contributions should be explored to ensure they are not paying more tax than necessary.”
