IHT receipts jump £0.5bn year-on-year

Receipts for inheritance tax (IHT) between April and July this year saw a rise of £0.5bn on the same period in 2020, new HMRC figures have confirmed.

HMRC’s data revealed that the total IHT intake for the period reached £2.1bn. Receipts for the month of July reached £571m which reflected a £32m rise on June’s total.

The standard IHT rate currently sits at 40% and is only charged on the part of an estate above the £325,00 threshold.

According to the latest figures, higher receipt totals in October 2020, November 2020 and the period between March and July 2021 are all expected to be due to higher volumes of wealth transfers amid the coronavirus pandemic. However, HMRC stated that it cannot verify this until full administrative data becomes available.

Lower receipts at the beginning of the tax year, April 2020 to March 2021, were due to a temporary issue when HMRC was unable to accept cheques for payment of IHT due to COVID-19. This was later resolved and resulted in a peak in June 2020 receipts.

Commenting on the latest figures, Hargreaves Lansdown personal finance analyst, Sarah Coles, said: “There’s typically a long delay between when someone dies and when the tax is paid, which can take up to six months. It means that what we’re seeing now is a result of the tragically high death rate in early 2021.

“HMRC says it’s to early to say whether the higher death rate and higher tax take are linked, but given that the last peak in IHT was in October, six months after the first wave, we can see a possible link.”

RBC Wealth Management director of wealth planning, Nick Ritchie, added: “Rising house prices and investment markets have increased the volume and value of estates caught in the IHT net, and with the Chancellor freezing the nil rate band until 2026, this trend looks set to continue.

“At the same time, however, many individuals have brought forward their plans to gift to the next generation amid mortality fears fuelled by the pandemic, and concerns over how the Chancellor might target larger estates in the future.

“One thing is for certain, at just 0.6% of the 19/20 tax take and with an IHT rate of 40%, already among the highest of the OECD countries, targeting IHT won't be the silver bullet to recouping the swelling deficit. Increasing the rate of IHT seems unlikely, but enhancing receipts by removing or reducing reliefs, targeting lifetime gifts or removing the generous capital gain exemption on death, could have a part to play.”

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