HMRC records £0.1bn IHT receipt increase

HMRC records £0.1bn IHT receipt increase

Latest figures published by HM Revenue and Customs (HMRC) show that IHT receipts for April 2022 to May 2022 are £1.1 billion, which is £0.1 billion higher than in the same period a year earlier.

 

The above figure contains the monthly IHT receipts patterns in each financial year since 2019 to 2020 and shows that receipts in April 2019 were particularly high, reflecting announcements (and subsequent delays and cancellations) of rises to probate fees in England and Wales, which is likely to have caused executors to bring forward tax payments to avoid the prospective higher fees

Lower receipts in April and May 2020, were due to a temporary issue where HMRC were unable to accept cheques for payment of IHT due to Covid-19, which was resolved, hence the peak in June 2020 receipts.

Higher receipts in October to November 2020, March to August 2021, and the record high receipts in March 2022, are expected to be due to a combination of, higher volumes of wealth transfers that took place during the Covid-19 pandemic, recent rises in asset values, and the government’s March 2021 decision to maintain the IHT tax free thresholds at their 2020 to 2021 levels up to and including 2025 to 2026.

Andrew Tully, technical director at Canada Life commented:

“Inheritance tax is continuing to prove itself as a valuable tax for HMRC, delivering £1.1 billion to the taxman already this financial year, £100 million higher than the same period last year. With tax thresholds frozen we will see more unsuspecting families drawn into paying IHT which has already doubled its tax take over the last 10 years. This surge will partly be driven by the ongoing increase in house prices, as residential property makes up the largest share of most estates. There has also been a higher volume of wealth transfers due to Covid – partly due to more deaths in the elderly population, but also as some people make outright gifts to help family during this difficult period.

Both the nil rate band and residence nil rate band are frozen until at least April 2026 so we can expect to see IHT receipts continue to rise.

The legacy from the pandemic may mean more people are open to discussing estate planning with family. Good planning can help to reduce or mitigate IHT so it’s essential to get expert financial advice for tax efficient ways to pass wealth onto loved ones.”

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