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Experts comment on IHT receipts rising by 10% compared to the same period one year earlier

New HMRC data out today shows that IHT receipts for April 2022 to May 2022 were £1.1 billion – £0.1 billion higher than the same period a year earlier. Experts from across the industry have given their take on the situation. 

Julia Rosenbloom, tax partner at Evelyn Partners, commented: “With IHT collections showing another year-on-year rise, the need for families to take a close look at their tax planning and take professional advice has never been more important. For many people the summer months are when things quieten down somewhat from busy work schedules and this presents an ideal opportunity to give thought as to whether you are making the most of all your allowances.

“We don’t know what, if any, changes will be made to IHT in the Budget later this year, but forecasting produced by the Office for Budget Responsibility earlier in 2022, suggests this upward trend will continue and that the Treasury will receive £37 billion in IHT payments over the next five years. With the Chancellor still under pressure to give more help to families with the cost of living crisis, successive year-on-year rises of IHT tax receipts will be welcomed at 11 Downing Street.

“Given that the nil rate band and residence nil rate band have been frozen until at least April 2026, many more will fall into this tax trap. There are, however, a number of legitimate ways families may be able to reduce or eliminate their IHT bills and now may be a particularly good time to make gifts.  Most people with a share portfolio will have seen a reduction in the value of that portfolio as the markets react to various economic factors and world events.  Gains on those shareholdings may have reduced significantly or the shares may even be standing at a loss. 

“One of the core challenges individuals face when making gifts is that the donor can suffer a capital gains tax charge if the asset they give away has increased in value during their period of ownership.  Depleted values can therefore present a great opportunity for making gifts.  Further, should the donor fail to survive seven years from the date of gift, so that the asset falls to be taxed as part of their estate, the lower value would be subject to IHT, even if the markets have subsequently recovered and the shares have gone back to their original value or higher.”

Andy Gillett, Director and Head of Wealth Management Advice at BRI Wealth Management, said: “The trend of rising IHT receipts continues when looking at the latest data with receipts from April 2022 to May 2022 being up around 10% on the same 2021 figures. These figures will be welcomed by the treasury who needs all of the revenue it can obtain at the present time especially with the uncertain economic outlook.

“We must remember to some extent they are backward looking and reflect higher assets values especially in the property markets and are likely to increase in any event due to the freezing of allowances until 2026. It will be interesting to see if this trend continues with pressure on markets and property prices as we see interest rates continue to rise.

“The freezing of allowances will mean that it is likely that more estates are liable to IHT as we move forward. Families should be considering how best to mitigate IHT well in advance. Often families leave planning to the last minute which renders it ineffective. There are many strategies families can consider and they should seek advice early on.”

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