Today’s announcement of the latest HMRC tax receipts and National Insurance contributions statistics has shown a considerable boost to the Government’s coffers following a surprise surplus in its finances in January. No doubt this will be welcome news for Chancellor Jeremy Hunt, especially ahead of next month’s Budget.
Commenting on the latest tax statistics, Rachael Griffin, tax and financial planning expert at Quilter said:
“This morning’s HMRC figures highlight just how lucrative the government’s freeze on tax allowances and thresholds is likely to be.
“Given the ongoing cost of living crisis, many people have now received increases in pay and some will have been pushed into the next Income Tax band as a result. This is exactly what the government had been banking on when the Chancellor confirmed the freeze on Income Tax thresholds during his Autumn Statement – thanks to fiscal drag, as more people move up the Income Tax bands while thresholds remain unchanged, the healthier government coffers will become.
“With the Spring Budget fast approaching, the Chancellor will be pleased that the changes he announced during his last statement are already having the desired effect – particularly as the reduction of the additional rate of income tax threshold is yet to come into play.
“Receipts from Income Tax and National Insurance payments from April 2022 to January 2023 reached £368.5 billion– a huge increase of £44.9 billion compared to the same period a year earlier.
“With inflation still in double digits, it is likely that wages will rise further and this upward trend in government tax take will continue due to the static thresholds. A recent FOI submitted by us found that HMRC forecasts 1,130,000 more people will pay higher rate tax and 301,000 more people will become additional rate taxpayers by the end of the threshold freeze.
“Inheritance Tax (IHT) is also proving increasingly lucrative for the government, and this too will only grow as the freeze continues. IHT receipts from April 2022 to January 2023 reached £5.9 billion, up £0.9 billion in comparison to the same period a year earlier.
“Inheritance tax has historically been considered a tax for only the very wealthy, but the current freeze coupled with inflated house prices has seen far more people caught by the net. Even those who may not consider themselves wealthy could now end up paying Inheritance Tax as their property value has grown so much.
“Given so many more people could now face an unwelcome IHT bill, seeking professional financial advice where possible will be even more important. IHT can be complex, particularly when it comes to the rules and restrictions of certain aspects such as the Residence Nil Rate Band, so professional support can help take the pressure off while also helping to mitigate costs through careful financial planning.”