Inheritance Tax & Covid-19
Welcome to February!
According to the latest HMRC figures published, inheritance tax receipts hit a five-year high in the final quarter of 2020. Receipts steadily rose from August onwards and peaked at a five-year high in October 2020.
While this pattern of higher receipts in the winter months is fairly common, this latest rise was significantly more pronounced last year and this is likely to be due in part to the impact of Covid 19 in Spring 2020.
The results show that Covid 19 is continuing to have an impact on how HMRC is able to collect and receive across several taxes and it looks like inheritance tax has not been immune to this.
Results for the 2019/2020 tax year already show the beginning of a slight dip in inheritance tax receipts themselves which for the large part has been attributed by HMRC to their refusal to accept cheques in the early stages of the pandemic.That situation has now been resolved.
Interestingly, HMRC has also provided a glimpse into the inheritance tax receipts received so far in the current tax year, finding that they are already up by £0.1 billion on the same period the year before.
If this trend continues we can expect inheritance tax and other income and capital related taxes to start playing an increasingly important role, especially as we start to see falls in consumption taxes such as alcohol and fuel.
Inheritance tax continues to be a real concern for many, particularly when a significant tax bill must be settled within six months of a loved one’s passing. Although inheritance tax may well present a concern for many, that concern does not often translate into a coherent strategy or effective implementation.
Taxpayers should ensure as a bare minimum that they have a will to ensure their estate goes where it should. They might also consider making gifts to loved ones while still healthy enough to do so and make the most of government available tax reliefs.
For the coming year, it is likely inheritance tax will continue to rise, particularly if asset values begin to increase in 2021 and if changes are made in line with the Chancellor’s commissioned review into inheritance tax last year.
Taxpayers might wish to consider basic tax planning now before any changes we may see in the March Budget. Astute taxpayers who have already thought through their potential liability and have robust planning in place may, of course, wish to keep an eye on the Budget pronouncements before moving forward with this years tranche of planning.