Treasury pockets £7bn inheritance tax however Rachel | U.Okay.Finance Information
Inheritance Tax receipts for April 2024 to January 2025 are £7.0 billion, £0.7 billion more than final yr, HM Income & Customs revealed at the moment.
Some specialists are warning that regardless of the file tax take, the Chancellor of the Exchequer could also be contemplating eradicating the power to present money tax-free within the seven years earlier than somebody dies.
Rising property costs and inflation, mixed with a freezing of the IHT limits of £325,000 for belongings and £175,000 for inherited property, means more and more households are being dragged into paying the tax.
Shaun Moore, tax and financial planning professional at Quilter, mentioned: “Rising house prices, particularly in the South East, mean many people that don’t consider themselves to be wealthy will now find themselves above the threshold and facing a 40% tax bill.”
Moore mentioned: “This relentless rise in inheritance tax receipts is baked into Government policy.”
Moore mentioned farmers and business house owners are additionally feeling the strain.
“The upcoming reforms to Agricultural Property Relief and Business Relief could force more family farms and small enterprises into difficult decisions about their futures. A tax once aimed at the wealthiest estates is now creeping further into the middle class, and with unspent pensions set to be taxed from April 2027, the government’s IHT windfall is only set to grow.
Ian Dyall, Head of Estate Planning at wealth management firm Evelyn Partners, said that even though the inflation-led boost to the Treasury coffers will already be accounted for in the fiscal forecasts the chancellor may be considering further ways to tax cash and assets after people die.
“Given the wide-ranging pressures on the public funds, with geo-political upheaval now prompting requires larger defence spending, it won’t be long earlier than Rachel Reeves is again compelled to hunt new methods of boosting tax revenues. With the self-imposed limits on how she will be able to do that, IHT stays one of the few methods the Chancellor can wriggle out of the fiscal strait-jacket.
‘Pension pots will not become liable to IHT until April 2027 and the combined business and agricultural property relief exemption will not be cut to £1m until April 2026. While it seems unlikely further tax changes will be announced at the spending review in late March, the next autumn Budget could well stir speculation if the Chancellor has to cast around for a few extra billion to balance the books.
He warned that the Treasury could try to extract a bit more from IHT by closing off some of the options that families have been using to reduce their IHT liability, such as removing or reducing the seven-year exemption on gifts.
Moore said: “Inheritance tax remains one of the most resented taxes in the UK, yet the government is changing policy so more people than ever will pay it. Without reform, families will continue to find themselves hit with unexpected tax bills on what they hoped to pass down.
CGT receipts surge
Capital Gains Tax receipts reached £14.56 billion, similar to the £14.59 billion collected in the same period last year. CGT receipts have increased by 271% over the past decade, from £3.91 billion in 2013-14 to £14.49 billion in 2023-24. This dramatic rise highlights how CGT has become an increasingly lucrative source of revenue for the Treasury, with successive governments gradually pulling more taxpayers into its net through lower exemptions and higher rates.
PAYE and NICs continue to boost Treasury coffers
HMRC’s latest figures reveal that PAYE income tax and National Insurance contributions (NICs) receipts totalled £349.1 billion from April to January 2025, an increase of £10.3 billion compared to the same period last year.
Employer NICs are set to rise from 13.8% to 15% in April 2025, and the threshold at which employers start paying NICs will drop from £9,100 to £5,000. These changes will increase costs for businesses and potentially affect wages and hiring decisions.
Stephen Lowe, group communications director at retirement specialist Just Group, commented: “The latest IHT receipts data for January will be a welcome boost for the Treasury, with the 2024/25 tax year looking almost sure to scoop another all-time record level of IHT revenues. Frozen thresholds and rising asset prices continue to be the main drivers of the current record tax take.
“The Chancellor’s Autumn Funds revisions to the IHT regime resulted within the OBR predicting that roughly one in 10 deaths will incur IHT by 2029-30, double the proportion in 2023-24, that means that within a decade roughly twice as many estates might be hit by IHT.
“We’d encourage people to commonly assess the worth of their property, together with up-to-date property valuations, to know whether or not they might be affected by IHT. Property planning will be complicated, and looking for skilled financial advice can help people navigate the principles, mitigate potential liabilities, and guarantee they go on as a lot wealth as potential to their family members.”
The Treasury has been requested to remark.
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