HM Revenue & Customs collected £2.1bn between April and July 2021 in inheritance tax receipts, £500m more than the same period in 2020.
The government has said that lower receipts at the same point last year were due to a temporary issue where HM Revenue & Customs was unable to accept cheques for payment of inheritance tax due to Covid-19, which created a peak in June 2020 receipts.
It also said higher receipts in October 2020, November 2020 and March to July 2021 were expected to be higher due to greater volumes of wealth transfers that took place during the pandemic. However, it said HM Revenue & Customs would not be able to verify this until the full administrative data becomes available.
The government has increased its inheritance tax take by £500m for two main reasons. The first is the fact that the comparison period is April to July 2020, a time where HM Revenue & Customs were suffering from severe disruption as a result of the pandemic which would have naturally impacted their processes and reduced the amount of money they were able to accept from estates.
The second reason, and the one that will be most pleasing to the Chancellor, is that is appears the fiscal freeze is working. The Chancellor’s freeze on the nil rate band and the residence nil rate band at the last Budget is having the desired effect. It is dragging an increasing number of people into paying inheritance tax, particularly now asset prices have swelled in the past 12 months or so.
Inheritance tax generates around £5bn for the government each tax year, so tweaks around the edges aren’t really going to make a dent on the fiscal black hole. The targets over the next few years are likely to be a tightening of the regimes surrounding reliefs; that means business property relief, agricultural property relief, possibly holdover relief and the tax free capital gains tax uplift on death.
The figures were released on 20 August 2021 and the detail may be found at:
Stephen Parnham
