New data published today by HMRC shows that IHT receipts for April to July 2022 were £2.4 billion, which is £0.3 billion higher than the same period a year earlier.
Julia Rosenbloom, tax partner at Evelyn Partners, the leading integrated wealth management and professional services group created from the merger of Tilney and Smith & Williamson, comments:
“This latest reported year-on-year rise for IHT receipts follows HMRC’s recent bumper annual update showing the largest single-year rise in collections of the tax since the 2015/2016 tax year. It’s clear that as a result of frozen tax thresholds, combined with rising house prices, IHT now catches more than just the wealthiest families. Those with more modest finances should also give thought to their tax planning to help minimise the chances of being hit by a hefty IHT bill.
“Although some indicators have recently reported a drop in house prices for the first time this year, analysts have suggested this is seasonal as many home-owners head off on extended summer holidays and experts are still predicting we’ll end 2022 with property prices showing an annual uplift. Climbing house prices and the fact that the nil rate band and residence nil rate band have been frozen until at least April 2026 helps explain why more families are being pushed into the scope for IHT.
“Liz Truss, the favourite in the race to become the next prime minister, has made cutting taxes a prominent theme of her leadership campaign. However, it would be wrong to think that Truss and her Chancellor will cut taxes across the board if, as expected, she moves into Downing Street next month. Truss’s pledges to reverse the recent national insurance increase and the scheduled corporation taxes increases will be costly and given the pressures to commit spending to help ease the cost of living crisis, she will need to look elsewhere to shore up the Treasury’s finances. It’s not inconceivable that other taxes could be increased to help balance the books. Truss has pledged a ‘complete review of the tax system’ and confirmed that IHT would form part of that review, but what changes will be introduced is far from clear at this stage.
“Against this uncertain backdrop, families could end up paying more tax than they need to if they don’t regularly review their tax planning and take a close look at the allowances available to them. By considering tax planning strategies such as making gifts to family members or investing tax-efficiently there are a number of legitimate ways families may be able to reduce or eliminate their IHT bills.”