Today HMRC announced that it has collected £3.2 billion in Inheritance Tax (IHT) between April and August 2023, which represents a £0.3 billion year on year rise.
Commenting on the figures, Stevie Heafford, Tax Partner at HW Fisher said:
“Today’s figures are a clear reminder of the importance of Inheritance Tax planning. HMRC is on track for a record-breaking year for Inheritance Tax receipts, helped by the nil rate band being frozen at £325,000 per person until 2028. The nil rate band can be used against both lifetime transfers and transfers on death, but many forget that it “refreshes” every 7 years, making it an essential part of lifetime planning”.
“Making gifts throughout your lifetime is another effective way to ensure that you are leaving as much behind to your loved ones as possible. For this, there is an annual exemption of £3,000 which can be rolled forward up to one tax year. In addition, small gifts of up to £250 and gifts out of excess income can be made to anyone free of Inheritance Tax. For marriage or civil partnership celebrations, you can give up to £5,000 depending on your relationship to the giftee. In some scenarios it can also be tax efficient to make gifts to charity, as not only are they tax exempt, if you leave at least 10% of your net estate to charity, your rate of IHT will be reduced to 36%.”
Meanwhile HMRC is bringing in less money through Stamp Duty Land Tax (SDLT) and Annual Tax Enveloped Dwellings. Receipts for April to August 2023 totalled £6.4 billion, which is £2.5 billion lower than in the same period a year earlier.
HMRC attributes these figures to lower transaction numbers, the lower rate of taxation and the introduction of new attractive reliefs for first time buyers in September 2022.
Tim Walford-Fitzgerald, Private Client Partner at HW Fisher adds:
“These SDLT figures don’t paint a complete picture of the UK property market. In reality there are a number of factors impacting overall attitudes towards purchasing decisions. Landlords and those with buy-to-let mortgages are especially vulnerable to changing government policy. Uncertainty over the political landscape can influence longer term investment decisions, such as property purchases, for the affluent, who may be particularly concerned about future tax raising measures.
“Nevertheless, individuals are able to benefit from the temporary stamp duty relief announced last year which increased the threshold for buyers where no stamp duty is owed from £125,000 to £250,000 as well as for first-time buyers from £300,000 to £425,000. As a result, individuals who qualify will pay less or no SDLT tax within these thresholds until 31 March 2025.”
If you are interested in receiving tax advice for your specific circumstances, please reach out to Stevie Heafford or Tim Walford-Fitzgerald.
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