IHT

Pandemic pushes Inheritance Tax haul to record high

The high death count due to coronavirus meant Brits paid £571m in inheritance tax (IHT) in July 2021 – the most ever paid in a single month.

The total IHT paid since the start of the new tax year in April climbed to £2.1bn in July, up £500m compared to the same period last year.

 

The record IHT taken in July is likely to be a result of the rise in deaths of people with coronavirus earlier this year. There’s typically a long delay between when someone dies and when the tax is paid, which can take up to six months. It means that what we’re seeing now is a result of the high death rate in early 2021.

 

HMRC says it’s too early to say whether the higher death rate and higher tax take are linked, but given that the last peak in IHT was in October, six months after the first coronavirus wave, a link is possible.

 

Meanwhile rising house prices and investment markets have increased the volume and value of estates caught in the IHT net.

 

David Gibb, chartered financial planner at Quilter, 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.”

 

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Paying IHT comes at the worst possible time. Families are still reeling from bereavement when they have to go through the administrative nightmare of probate, and then work out how to pay the tax bill. The more you can plan for this tax in advance, the less pressure it will put on your family when the worst happens.

 

“You might, for example, give gifts during your lifetime. You have an annual gift allowance and can give gifts of any size, and as long as you live for seven years afterwards, they are counted as being out of your estate for IHT purposes. Alternatively, you could consider a whole of life policy written in trust, which will be paid outside of your estate and can be used to meet the cost of the tax.”

 

Stamp duty receipts reached £1.309bn in July, the highest intake on record for the levy. Figures from HMRC show this exceeded the previous high of £1.196bn taken in March when the stamp duty holiday was originally expected to end.

HMRC said the intake was “down to the exceptional high number of transactions” due to the tapering of the stamp duty holiday on 30 June.

YourMoney.com

Openwork smarthub

Written by: Emma Lunn
20/08/2021
Share :

Related Post

Write A Comment

Your email address will not be published. Required fields are marked *

The internet is not a secure medium and the privacy of your data cannot be guaranteed.

Ready to get started ?

Speak to a specialist at (0153 635 7806)