HMRC took in £3.9bn from inheritance in six months to end of September, £400m more than in the same period last year.
The government collected a record amount from inheritance tax (IHT) in the six months to the end of September as frozen thresholds mean more estates are being hit by the tax.
HM Revenue & Customs (HMRC) took in £3.9bn from IHT from April to September – £400m more than in the same period last year.
IHT receipts in June were the highest month on record, which HMRC attributed to higher interest rates encouraging more people to pay overdue tax bills.
The government has frozen IHT thresholds until 2028, with the nil-rate band stuck at £325,000.
Rosie Hooper, financial planner at Quilter, said that as asset prices rise, ‘fiscal drag’ will mean more is raised from this tax.
‘The problem lies in the fact that higher property prices have upped the number of households falling in the scope of IHT, and while growth has slowed in the housing market, we are still yet to see a significant drop in prices,’ she said.
‘The value of the average UK home now sits at almost £291,000 in August, with that average much higher in the South of England.’
Last month The Sunday Times reported that prime minister Rishi Sunak is considering scrapping IHT in an election campaign giveaway pledge.
Labour, which this morning was celebrating two monumental victories in yesterday’s by-elections in Mid Bedfordshire and Tamworth, has criticised this idea, with shadow financial secretary James Murray saying it would be an ‘unfunded tax cut’ that could cause further economic damage.
However, it was also reported last month that Labour is considering removing business and agricultural property relief, which could have an impact on AIM portfolios, which use this relief to mitigate IHT.
Sunak’s plan could cause even bigger issues for AIM and unlisted IHT products, which add up to a sizeable £15.1bn, as they become obsolete.
Overall, HMRC collected £392.5bn in tax over the six months to the end September, £23.1bn higher year-on-year.
Frozen income tax and other thresholds have seen the Treasury’s tax revenue as a percentage of national income become the highest on record, according to the Institute for Fiscal Studies.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: ‘The latest set of HMRC tax receipts shows that government’s stealth tax strategy continues to do its job in a big way, with tax takings remaining firmly on the upward trajectory.’
Jack Gilbert (City Wire)