Latest HMRC data reveals that IHT receipts for the period April 2021 to January 2022 were £5bn; £0.7bn higher than the same time last year.
Inheritance tax receipts for April to November 2021 were also higher at £4.1bn, a £600m increase compared with the same period in 2020.
Due to a covid-related internal problem, cheques for payment of IHT could not be accepted by HMRC, causing IHT receipts to be lower in April and May 2020. The issue meant that there was a spike in payments in June once the problem was resolved.
Commenting on the uplift that will be felt by the Treasury, Julia Rosenbloom, tax partner at Smith & Williamson, commented:
“The Chancellor’s next budget could bring in changes to personal taxes that may affect the feasibility of families passing wealth to the next generation and, accordingly, the level of IHT payable.
While we wait for confirmation as to when the next budget will actually take place, it’s important for families to think carefully about their tax planning and take professional advice to ensure they use their current allowances before any possible changes are introduced.”
Even if no direct changes are made to IHT in the next budget, many families can still expect to see increased IHT bills in the coming years given both the nil rate band and residence nil rate band have been frozen until at least April 2026.
This is bringing more estates into scope on the back of rising property values in particular. By planning ahead, there are a number of areas where an IHT bill could be reduced or eliminated. For example, families could consider investing tax-efficiently and making gifts to family members.”
Nick Ritchie, director wealth planning at RBC Wealth Management, said:
“IHT receipts increasing at record rates now tells a familiar tale.
Rising asset prices, from family homes to stock market portfolios are being assessed against an IHT threshold that hasn’t increased since 2009 and will remain frozen until 2025/2026. For all intents and purposes this is a tax rise.
When you consider that if the threshold had increased by just 2% per year since 2009 it would now be nearly £100,000 higher. Without that increase it means married couples and civil partners are losing up to £80,000 in extra death duties when passing on their estates.
More positively, last year the Chancellor dismissed many of the suggestions from the office for tax simplification’s review of IHT, meaning current rules and exemptions aren’t likely to be subject to major reform in the near future.
This gives individuals certainty with which to plan and so whether it’s gifting to individuals or charities, investing in exempt assets or insuring against the liability, there remain a number of ways to mitigate the impact of IHT. The key is to plan in advance and seek appropriate advice.”