Following on from the latest HMRC data reveal concerning the NI hike, Rachael Griffin, tax and financial planning expert at Quilter has commented:
“This morning’s HMRC data shows receipts from Income Tax and National Insurance payments for April to May 2022 were £68.4bn, up £10.7bn compared to the same period a year earlier. This month’s data reveals the impact on pay packets to boost government coffers from the second month of increased National Insurance contributions following the government’s 1.25 percentage point hike which came into effect on 6 April. The Chancellor has been helped by additional growth from a rise in the number of paid employees in the last month, as well as an increase in monthly pay.
“While the National Insurance hike will have caused an unwelcome dent in people’s monthly income for now, this will soon ease somewhat. As announced in the Chancellor’s Spring Statement, the NI threshold is set to increase to £12,570 to be in line with the Income Tax threshold in July. Once this is in place, we would expect to see a dip in NI payments.
“While the government may soon lose a small portion of the gains it has been making through the NI hike, Inheritance Tax looks set to make up for it in part. IHT has been a lucrative area for the Treasury, and with house prices still on the rise, this will surely continue. The latest figures show that IHT receipts for April to May 2022 were £1.1bn, up £0.1bn compared to the same period a year earlier.
“IHT receipts have been increasing steadily each month for a long while now, showing the government is gradually increasing tax revenues without significantly increasing the burden on taxpayers. However, given IHT was once viewed as a tax on wealthier individuals, many could be in for a shock. The reality is that as property prices have continued to rise, they have crept ever closer to the standard NRB. With the NRB and RNRB frozen until 2026 and house prices still on the up, many more people could face a hefty IHT bill.
“For months now people have been anticipating a slowdown in house prices as a result of the UK’s current financial concerns, but this is yet to materialise. Just yesterday the government released new data which showed the average house price sat at £281,161 in April 2022, a huge 12.4% jump compared to the year prior. However, soaring inflation, further Bank of England interest rate hikes and the high costs of moving home will put off prospective buyers who are already feeling the pinch due to the cost-of-living crisis and we could see a slowdown as a result – though it would be unlikely to take the sting out of IHT bills for some time yet.”