Inheritance Tax  

IHT receipts rise by £600m in 2021

IHT receipts rise by £600m in 2021

HM Revenue & Customs collected £4.6bn in inheritance tax between April and December 2021 - an increase of £600m on the year before.

In total, HMRC collected £5.9bn during the calendar year 2021, an increase on the £5.2bn collected in 2020.

The increase was, at least in part, affected by the start of the pandemic in 2020 when HMRC was unable to accept cheques for payment of IHT due to Covid-19.

But this meant receipts were lower than usual in April and May 2020 - though this was resolved by June of that year.

Shaun Moore, tax and financial planning expert at Quilter, said: "With property prices continuing to rise, even though the stamp duty holiday is a distant memory, IHT payer’s bills will rise in future with the ongoing house price inflation.

"This increases the government’s tax take with seemingly not too much of an additional burden on taxpayers."

Julia Rosenbloom, tax partner at Smith & Williamson, said: "The latest reported year-on-year rise in IHT collections will be welcomed by the Chancellor who needs every pound he can get at the moment to pay for the government’s ambitious spending commitments.

"One of the key factors behind the latest hike in IHT receipts is likely to be the fact that both the nil rate band and residence nil rate band have been frozen until at least April 2026, resulting in many families receiving increased IHT bills as more estates are brought into scope on the back of rising property and share prices."

In his Budget in early 2021, chancellor of the exchequer Rishi Sunak froze the IHT allowance as well as the lifetime allowance and the capital gains tax annual allowance until 2026.

Moore highlighted the looming increase in probate fees - due to kick in tomorrow - as adding to the cost of the death of a loved one.

He said: "It seems you can’t escape soaring prices, even in death, with fees going up by 27 per cent for personal applications and 76 per cent for those made through a professional. The rate is therefore equalised at £273 for both personal and professional applications.

"While a positive for the government that the fee now actually aligns to the cost of providing the service, the timing of the increase is very poor with inflation on the rise and the cost of living crisis threatening a financial nightmare for many over the winter."