IHT receipts up £500m from April to July

Tom Ellis reports

The taxman took in an extra £500m from April to July in inheritance tax (IHT) receipts.

HM Revenue & Customs (HMRC) collected £2.1bn between April and July 2021 in IHT receipts, £500m more than the same period in 2020.

The government said lower receipts at the same point last year were due to a temporary issue where HMRC was unable to accept cheques for payment of IHT 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 HMRC would not be able to verify this until the full administrative data becomes available.

Quilter Chartered financial planner David Gibb said: “The government has increased its IHT 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 HMRC 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 subtle freeze on the nil rate band and the residence nil rate band at the last Budget is having the effect desired. It is dragging more and more people into paying IHT, particularly now asset prices have swelled in the past 12 months or so.”

He added: “But the numbers really have to be put in context. IHT 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. An extra £500m for the government’s coffers is really just a drop in the ocean. If the Chancellor wants to raise some serious cash post-pandemic, IHT is not the place to look.”