UK's IHT tax take rises 33% from 2020

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UK's IHT tax take rises 33% from 2020

HM Revenue & Customs (HMRC) received £1.5bn in IHT receipts between April and June 2021, a 33% of £400m from the same period in 2020.

The government has commented that higher receipts in 2021, as well as in the second of 2020, are likely to be due to the pandemic creating more transfers.

However, this cannot be verified until full administrative data becomes available.

It should be remembered that both the nil rate band and residence nil rate band have already been frozen until at least April 2026, meaning many families are already receiving increased IHT bills due to rising property and share prices."

Ami Jack, head of national tax at Smith & Williamson, has pointed out that higher IHT liabilities are likely to continue for families due to various bands currently being frozen.

"It should be remembered that both the nil rate band and residence nil rate band have already been frozen until at least April 2026, meaning many families are already receiving increased IHT bills due to rising property and share prices," said Jack.

"By considering options such as making gifts and investing tax-efficiently, there are a number of areas of tax planning that may help reduce or eliminate an IHT bill."

Overall, government tax receipts during this period were £61.7bn higher than last year with £159bn being received between April and June. A significant chunk of this was due to VAT payments being deferred from 2020 due to the pandemic.

In hindsight, Informed Choice Financial Planning's Martin Bamford is not surprised by the increase in receipts as asset values have continued their increase and dragged more estates beyond IHT allowances.

"More expensive estates combined with a lack of inheritance tax planning is a potent combination, resulting in a healthier tax take for the Treasury," said Bamford.

"I guess we should be grateful to those families who fail to plan, as they will ultimately reduce the tax burden on the rest of us, as the government seeks to recoup Covid expenditure."

First published by our sister title Professional Adviser