Concern mounts over IHT hike as HMRC receipts sees 50% leap

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Concern mounts over IHT hike as HMRC receipts sees 50% leap

Inheritance tax (IHT) receipts for April and May 2021 were more than 50% higher than the same two months in 2020, according to the latest data from HM Revenue & Customs.

HMRC said the 54% year-on-year hike could be the result of "high volumes of wealth transfers that took place during the Covid-19 pandemic".

That said, the taxman could not verify that theory until more data becomes available.

Rumours have been swelling since the weekend about a plan by the Chancellor to launch a pensions tax raid in an Autumn Budget…it wouldn't be unthinkable for lucrative reforms to be considered for other taxes, particularly IHT and CGT ."

The data also revealed full-year IHT receipts of £5,326m for 2020-2021. A £204m increase from the year before.

Against this backdrop, concern is mounting over the possibility that IHT and CGT will be hiked up later this year as the government attempts to recover from debt incurred by the pandemic.

Smith & Williamson tax partner Julia Rosenbloom said: "As the Government continues to search for new ways to pay for its response to the pandemic, the Treasury will be focused in the months ahead on investigating how it can further increase the revenue it gains from tax receipts.

"Rumours have been swelling since the weekend about a plan by the Chancellor to launch a pensions tax raid in an Autumn Budget…it wouldn't be unthinkable for lucrative reforms to be considered for other taxes, particularly IHT and CGT given the amount they raise for the Treasury on an annual basis."

In the Spring budget earlier this year, Chancellor of the Exchequer Rishi Sunak imposed tax freezes on both inheritance and capital gains tax until 2026, which some have referred to as a ‘stealth' mechanism that will see IHT bills increase as the value of property and wealth rises.

The Chancellor announced that both the nil and residence nil rate bands will be frozen until April 2026. The nil-rate band (NRB) stayed at £325,000 and the residence nil-rate band (RNRB) at £175,000.

First published by our sister title Professional Adviser