Inheritance tax receipts soared to £5 billion between April 2021 and January 2022, £700 million more than the previous year.
The rise was partly driven by rising house prices and the higher volumes of wealth transfers during the pandemic.
Laura Tommis, trust manager at ZEDRA Group, said: “The increase is not surprising in view of UK house prices continuing to grow by 10% during 2021, coupled with strong returns in the stock market and the freezing of the Nil Rate Band and Residence Nil Rate Band which have brought more families within the remit of inheritance tax.
“The figures will no doubt be welcomed by the government ahead of next month’s budget against the current economic landscape of high inflation, rising energy prices and fiscal drag. With a number of immediate burdens already imposed on tax payers, it is unlikely that the government will afford any relief to families from the impact on IHT. Instead, it is quite possible that the government may look to revise current IHT expectations further to support economic recovery with Business Property Relief being a possible target.”
Andrew Tully, technical director at Canada Life, commented: “No one likes to pay any more tax than they need to and yet with some simple steps you can arrange your financial affairs to be more tax efficient from an IHT perspective. These simple steps could include the order in which you access your asset during retirement, gifting or putting money into trusts. As IHT is a largely discretionary tax, putting your financial affairs in order will ensure your beneficiaries receive your assets in the most tax efficient way possible.”
In addition, receipts from PAYE income tax and national insurance contributions (NICs) for April 2021 to January 2022 rose to £275.9 billion, up £27.6 billion than in the same period a year earlier.
The rise in figures was driven by the number of paid employees continuing to increase as the UK emerges from the pandemic.
Meanwhile, receipts from self-assessment income tax and NICSs for the same period were £47.2 billion, which is £10.5 billion higher than a year earlier.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “The data shows the nation continuing to emerge from the pandemic with income tax and national insurance continuing to surge as more people return to work. There has also been quite a climb in self-assessment income tax and national insurance which could be an indication of more people deciding the time is right to start working for themselves after re-assessing their priorities during the pandemic.
“The continuing rise in these receipts signals good news as we see more people in work but many of us are also bracing ourselves for the forthcoming 1.25 percentage point rise in national insurance due to come in April. This is a move that will really hit us in the pocket at a time when many of us are already struggling to deal with the rising cost of living.”
Morrissey noted that while stamp duty receipts continue to be robust as people rushed to move before Christmas, recent reports suggest that the race to move out of cities has slowed as second steppers look to buy homes within easy commuting distance of work.
Morrissey added: “These moves look likely to keep house prices high as demand continues to outstrip supply.”
