22 November 2022
If you are covering the latest HMRC tax receipts and National Insurance contributions statistics, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:
“Just a few days on from the Chancellor’s Autumn Statement, this morning’s HMRC data will no doubt cement the government’s decision to lean on frozen tax thresholds to help fill the current gap in public finances.
“Receipts from Income Tax and National Insurance payments from April to October 2022 reached £220.7bn– up £28.4 bn compared to the same period a year prior. Given Income tax thresholds are now frozen until 2027/28, this already growing source of government income will become increasingly lucrative.
“Average earnings have continued to grow during the past few months, and this increase is likely reflective of that. However, the National Insurance threshold was increased to match the Income Tax threshold earlier this year and resulted in approximately 30 million people paying less NI. While we could see a dip in the Treasury’s takings as this change settles in, so far it appears to have had very little impact.
“This latest data also shows Inheritance Tax (IHT) is becoming gradually more profitable for the government, primarily as a result of high house prices. IHT receipts from April to October 2022 reached £4.1bn, a considerable increase of £0.5bn compared to the same period a year earlier.
“Alongside Income Tax, the Chancellor also confirmed that Inheritance Tax (IHT) thresholds will be frozen for a further two years – a move which is expected to net more than an additional £1 billion for government coffers by the 2027/28 tax year according to OBR forecasts.
“IHT has traditionally been viewed as a tax on wealthier individuals, but the number of people caught in the IHT net has been rising steadily for several years now and the reality is that this number will continue to rise as we move further into the freeze.
“House prices have started to see a small dip, and they are expected to cool further in the coming months, but this is unlikely to help reduce IHT bills for some time yet. The average UK house price was £294,559 in September 2022 – just £30,441 lower than the nil rate band. Should we see a rebound in house price growth following any fall – which is highly likely given the levels of supply and demand in the UK – in the years the nil rate band is frozen, the average house price is likely to tip over the threshold and will leave many more families facing a hefty IHT bill.”
