Total IHT receipts hit £5bn for current tax year

Inheritance tax (IHT) receipts for the period between April 2021 and January 2022 totalled £5.0bn, new HMRC figures have revealed.

This total is £700m higher than in the same period last year.

HRMC confirmed last month that IHT receipts in the tax year up to December had totalled £4.6bn – meaning HMRC took in an additional £0.4bn in IHT receipts during the opening month of 2022.

In the previous tax year, the higher receipts that HMRC received in October and November 2020, and from March to August 2021, are expected to be due to higher volumes of wealth transfers that took place during the pandemic. However, HMRC said it cannot verify this until full administrative data becomes available.

Commenting on the latest data, Canada Life technical director, Andrew Tully, said: “The latest data shows IHT receipts continue to increase, partly driven by rising house prices and the higher volumes of wealth transfers during the pandemic. No one likes to pay any more tax than they need too 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 assets 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.

“Seeking regulated financial advice is a critical first step on that journey.”

Quilter tax and financial planning expert, Shaun Moore, added that a rethink to how IHT is calculated could improve understanding of the system.

“Sustained property price growth and asset price inflation has pushed up the value of estates, meaning higher IHT receipts for the government,” Moore said.

“The residence nil rate band (RNRB) was introduced in 2017/18 to account for rampant house price growth, but as a result we have an incredibly complex IHT system, which is poorly understood and therefore poorly planned for. In fact, the Office of Tax Simplification has said that the RNRB is one of the ‘most complex’ areas of IHT and even said that some solicitors choose not to advise clients on the RNRB because it is too complicated.

“Perhaps now is time for a rethink of IHT to make the regime as easy to understand as possible for IHT payers.”

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