Rachael Griffin, tax and financial planning expert at Quilter comments on the HMRC tax receipts and National Insurance contributions statistics,
“IHT receipts from April to August 2023 reached £3.2bn, £0.3bn higher than the same period last year. The total inheritance tax take for the 2022-23 tax year was £7.1bn, meaning this year’s take is well on course to break new records and could come close to £8bn.
“This increasing revenue causes a policy conundrum for the government as election season draws nearer and more Tory backbenchers call for inheritance tax reform or its abolition as a vote-winning tactic. Increasing the inheritance tax threshold to £1m is one of the latest to be tabled, and while it would likely be a crowd pleaser, the government might be less keen given the ever-increasing revenue it is seeing from the tax.
“The Chancellor has extended the IHT threshold freeze until at least April 2028, and it is looking likely to rake in record amounts by stealth. Higher property prices have upped the number of households falling in the scope of IHT, and while growth has slowed in the housing market, we are still yet to see a significant drop in prices. The value of the average UK home now sits at almost £290,000, just £35,000 less than the frozen £325,000 IHT nil rate band.
“Frozen IHT thresholds form part of a broader fiscal drag strategy employed by this government, which has also frozen income tax thresholds, capital gains tax allowances and dividend allowances in order to boost revenues.
“The latest figures show receipts from PAYE income tax and national insurance payments for April to August 2023 were £170.7bn, which is £9.5bn higher than the same period a year earlier. Given the threshold for the additional rate of income tax has reduced from £150,000 to £125,140, we can expect further rises in coming months.
“Seeking professional financial advice is key when it comes to managing your money in the most tax efficient way, particularly for more complex areas such as inheritance tax. The rules and restrictions surrounding aspects such as the residence nil rate band can be difficult to navigate, and with an increasing number of people facing unexpected IHT bills, speaking to a financial planner is key to ensuring you plan effectively and mitigate unnecessary costs.”
