Inheritance tax receipts reached £1.5 billion between April and June 2021, £0.4 billion more than for the same period a year earlier, illustrating the need for more people to take action and IHT advice.
According to the latest data from HMRC, IHT receipts in June totalled £539 million, resulting in the Treasury receiving £5.69 billion in the last 12 months – the largest amount in any 12-month period.
In March this year, the Chancellor announced that both the nil rate band and residence nil rate band would remain at existing levels until April 2026, extending the freeze on IHT for another 5 years.
The Government said the measures would raise an extra £985 million for Treasury coffers by the 2025/26 tax year.
Neil Jones, tax and wealth specialist at Canada Life, said: “The freezing of the IHT nil rate bands is even more significant as clearly more tax is being collected and with investment markets and property prices continuing to rise, we will expect receipts to continue rising. This landmark was not mentioned in HMRC’s narrative.
“The need to plan is more important than ever and if someone is willing to take action they can reduce the amount of inheritance tax payable when they die. If they chose not to do anything then the beneficiaries of the estate should consider taking action themselves.
“This could be as simple as life cover to provide a lump sum to meet the liability: simple, effective and often overlooked.”
Rachael Griffin, tax and financial planning expert at Quilter, said the increased IHT tax take was largely as a result of the Government’s freeze on rates, coupled with a comparison period in which the pandemic and HMRC’s inability to accept paper cheques for IHT payments reduced the amount of money raised through IHT.
Griffin said: “The increased tax take suggests that the Chancellor’s freeze on the nil rate band and residence nil rate band at the last Budget is having the effect desired. It is achieving the ‘fiscal drag’ it set out to do, particularly given property prices and other asset prices have marched considerably higher in the past year or so.
“However, the entire tax take from IHT really is peanuts when you compare it to other forms of tax. If the Chancellor wants to raise some serious cash post-pandemic, IHT is not the place to look.”
In total, HMRC’s tax receipts for April to June hit £159 billion, up £61.7 billion year-on-year, driven by increases in income tax, capital gains tax, national insurance and VAT.