According to data published by HMRC yesterday (July 21), IHT receipts in June were £539m meaning that in the last 12 months the Treasury collected £5.698bn - the biggest amount in any 12 month period.
Ami Jack, head of national tax at Smith & Williamson, said the 33 per cent year-on-year rise indicated IHT collections were starting to become more “lucrative” for the Treasury, at a time when it was far from certain how the pandemic would pan out and what the final bill to fund the chancellor’s economic support schemes would be.
In the March Budget the chancellor announced that both the nil rate band and residence nil rate would remain at existing levels until April 2026, at £325,000 and £175,000 respectively.
This means IHT bills will rise due to rising property and share prices.
Jack said: “It should be remembered that both the nil rate band and residence nil rate band have already been frozen until at least April 2026, meaning many families are already receiving increased IHT bills due to rising property and share prices.
“By considering options such as making gifts and investing tax-efficiently, there are a number of areas of tax planning that may help reduce or eliminate an IHT bill.”
Neil Jones, tax and wealth specialist at Canada Life, agreed.
He said: “The freezing of the IHT nil rate bands is even more significant as clearly more tax is being collected and with investment markets and property prices continuing to rise, we will expect receipts to continue rising. This landmark was not mentioned in HMRC’s narrative."
However, Rachael Griffin, tax and financial planning expert at Quilter, took a slightly different stance.
“The entire tax take from IHT really is peanuts when you compare it to other forms of tax," she said. "If the chancellor wants to raise some serious cash post-pandemic, IHT is not the place to look.”
Adviser support
Meanwhile the Openwork Partnership has launched a series of papers to support advisers to help clients get the full benefits of intergenerational wealth transfers.
Research by the Nuffield Foundation showed up to one in three households in the UK received inheritances or wealth transfers from their parents during their lifetime with average pay-outs estimated to be £115,000, while The Openwork Partnership’s own research showed around £293bn was earmarked for younger generations.
Openwork's educational papers look at the potential scale of future gifting plans while also identifying areas where clients will need support from advisers such as on tax and gifting.
They also point to the potential pitfalls and risks for clients of their own retirement plans being hit by their generosity.
The impact of Covid-19 has not stopped gifting, Openwork said, with more than £11.2bn handed out in family support during the pandemic.
Mike Morrow, chief commercial officer at The Openwork Partnership, said: “The intergenerational wealth issue is a major focus for advisers who are helping clients and their families every day to navigate the potential problems.
“It is also a major issue for the government as demonstrated by a range of recent policy initiatives and there is certainly more to come which will have an impact for financial advisers and their clients.”
sonia.rach@ft.com
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