Total tax receipts remain very strong and are up by £90.5 billion on the previous year in the 12 months to June, says Paul Haywood-Schiefer, Senior Manager at Blick Rothenberg.
“HM Revenue & Customs (HMRC) have received £737 billion in a 12-month period, which is quite a significant take compared to the last few years. Given inflation, we could see higher takes in VAT, fuel duties and annual tax receipts topping £800 billion. This strong performance could give the incoming PM and Chancellor some flexibility around future tax cuts.
“All taxes are contributing to this increase, with HMRC posting a record for Inheritance Tax (IHT) in June with £726 million collected. This is 24.1% higher than the previous record of £585 million set in March and seems to be an upwards trend over the last six months. However, it represents less than 1% of total tax take and only around 10% of Corporation Tax receipts, so it’s not setting the world alight. The Government have long struggled to gain more from IHT despite the 40% rate.
“While that is the case, this is a big jump in terms of receipts, and a 24% increase on a previous record in any tax is newsworthy. There are several possible reasons for the increase. Though, as with IHT receipts, £726 million sounds like a huge sum of money, a significant estate of a deceased individual can make quite an impact on the figures collected. IHT is due by the end of the sixth month following the death of the person. What we should be seeing here are the receipts related to individuals who died in December 2021. However, this may also include receipts of estates from much earlier which are being paid late to HMRC. This means one big, complicated estate that takes time to deal with and they might pay late because they were unable to agree figures.
“This tax is generally paid at 40% over a person’s available nil rate band, currently £325,000, which might be extended by the availability of a deceased spouse’s unused nil rate band or even with a transfer. The tax rate can be lower on gifts in the previous seven tax years and where 10% of the estate’s value is left to charity. Therefore, to generate £726 million of tax, we are looking at approximately just over £1.8 billion of assets being subject to tax for the month, which is just over £350 million more than would have been taxed to the previous record.
“As to the receipts themselves, they aren’t going to provide a huge boost to the Government’s coffers, but such a significant increase in receipts is money that probably was not expected, so will be a small bonus to be used elsewhere.”
Would you like to know more?
If you would like further information on this topic including how we can help you prepare for these changes, please contact Paul Haywood-Schiefer using the details on this page.