Inheritance tax becoming ‘more lucrative’ for HMRC as receipts rise to £1.5b – what to do
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Inheritance tax is usually levied on the estate of someone who has died and is passing on their assets. IHT is charged where an estate is valued higher than £325,000 and it is usually levied at 40 percent.
IHT is an unpopular tax among UK families and it is often dubbed a “death tax”.
Many savers feel it is unfair for the Government to take a relatively large slice of a family’s inheritance as assets are handed down and today, HMRC showed just how costly it could be.
HMRC detailed its IHT receipts for April to June 2021 were £1.5billion.
This is £400million higher than what it was in the same period last year, a 33 percent increase.
Ami Jack, the Head of National Tax at Smith & Williamson, examined these figures and reflected what it may mean for the Chancellor’s plans.
Ms Jack said: “Newly published data from HMRC shows that IHT receipts for April to June 2021 were £1.5billion – £0.4billion higher than the same period a year earlier.
“This 33 percent year-on-year rise indicates that IHT collections are starting to become more lucrative for the Treasury, at a time when it is far from certain how the pandemic will pan out in the coming months and what the final bill to fund the Chancellor’s economic support schemes will turn out to be.
“For some time there has been an expectation that an Autumn Budget was on the cards, which could have been an obvious time to introduce tax reforms to help pay for the cost of the pandemic.
“More recent rumours swelling around Westminster, however, suggest that a Spring Budget may be more likely to allow the Treasury to take stock of the economic impact of the current wave of coronavirus.”
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Ms Jack went on to break down how IHT bills could be managed.
As Ms Jack concluded: “Whatever the date of the next Budget, families should take the opportunity to give serious thought to their tax planning and make the most of their current allowances before possible reforms are introduced.
“It should be remembered that both the nil rate band and residence nil rate band have already been frozen until at least April 2026, meaning many families are already receiving increased IHT bills due to rising property and share prices.
“By considering options such as making gifts and investing tax-efficiently, there are a. number of areas of tax planning that may help reduce or eliminate an IHT bill.”
Overall, HMRC detailed tax receipts for April 2021 to June 2021 were £159billion, £61.7billion higher than what they were last year.
This revenue came from a number of sources on top of IHT, as the following details:
- Cash receipts were higher from Income Tax, Capital Gains Tax & National Insurance Contributions (NICs) (£17.3billion), Corporation Tax (£3.4billion), Hydrocarbon Oils (£2.5billion) and Stamp Taxes (£1.5billion)
- Cash receipts were lower from Air Passenger Duty by £33Million
- In percentage terms, receipts were also higher from Hydrocarbon Oils (62 percent), Stamp Taxes (58 percent), Inheritance Tax (33 percent), Corporation Tax (33 percent) and Income Tax, Capital Gains Tax & NICs (24 percent)
On top of this release, HMRC yesterday shared the results of a consultation on the clamping down on promoters of tax avoidance.
Crawford Temple, the CEO of Professional Passport who fed into the consultation, reflected on the results.
Mr Temple said: “HMRC’s intentions to clamp down on tax avoidance is to be applauded albeit that it was disappointing that only 18 stakeholders responded to the consultation with Professional Passport the only representative voice speaking up on behalf of contingent workers in the supply chain. However, yet more legislation is not the right course of action.
“A catalogue of legislation introduced over many years has resulted in a series of unintended consequences and much of it has not served to help and support the contracting sector and the whole supply chain for the better. Government has ignored advice and recommendations from stakeholders and industry experts so that the legislation continues to fail to address the underlying issues and challenges that our industry faces, namely non-compliance, transparency and enforcement.
“Non-compliance is fuelled by the complexity of the legislation and the current enforcement strategies do not work. In fact, they serve to incentivise non-compliant offerings and fail to support the compliant parts of the sector. The lack of visible enforcement, the lengthy delays in taking any action, and targeting the workers for recovery all serve the interests of those seeking to circumvent, or disregard, the rules.
“Professional Passport has already made significant recommendations to the Government as outlined in our recent report The Good, The Bad and The Ugly – Addressing the issues of non-compliance in the umbrella and payment intermediary sector and we urge Government to heed some of our suggestions.”
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