IHT and income tax continue unrelenting rise as government borrowing comes in lower
HMRC has released the latest tax receipt data: HMRC tax receipts and National Insurance contributions for the UK (monthly bulletin) – GOV.UK
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “There will be relief in the corridors of the Treasury that UK government borrowing came in lower than expected in July. It came in £1.1bn, down £2.3bn from the same month last year, according to the Office for National Statistics. It’s the lowest July figure for three years. While it won’t remove the tight fiscal bind the chancellor is in, it does ease the pressure a little. Borrowing is now largely on track with forecasts made by the independent Office for Budget Responsibility earlier this year. There were stronger than expected tax, and National Insurance receipts, potentially helped by the UK economy returning to growth in July and the effect of frozen tax thresholds taking effect. Even though the number of payrolled employees was estimated to have dipped during the month, wage growth remains at a strong 5% and an upswing in discretionary spending during the month may have helped boost the tax take. The effects of the higher National Insurance Contributions from employers will also have filtered through. It’s a brighter picture for the government but it won’t stop the chatter about tax rises in the Budget given that economic growth estimates have dialled back, gilt yields have been rising and the government will still have a hole to fill in the public finances.”
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown: “Inheritance tax receipts continue their unrelenting rise, hitting £3.1bn for the year so far. We are only part of the way through the year, but it already looks likely we are in for another record year for this most unpopular of taxes.
The decision to include pensions for inheritance tax purposes has garnered a lot of attention and has put the tax firmly on people’s radar. This means that those who think they may be affected can start putting a strategy in place to try and mitigate it. There are various gifting allowances such as the £3,000 annual allowance as well as gifting out of surplus income that will prove useful. However, it is hugely important that someone does not gift away too much too early to loved ones and potentially leave themselves short in their haste to avoid this tax.
It’s also worth saying that inheritance tax is not something that many families will need to worry about. There’s a set of thresholds available – known as nil rate bands. These mean that assets of any value can pass between spouses inheritance tax free and that the surviving spouse or civil partner inherits any of the deceased’s remaining nil rate bands. This means that couples have the potential to pass on up to £1m to their children or grandchildren free of inheritance tax.
However, there will be families who are not so lucky and could be caught unawares. Rapid house price growth in recent years may mean there are families out there with a looming tax bill they know nothing about. The same can be said for cohabiting couples who may have been together for decades but still don’t have the same rights as a married couple or civil partner. It’s important these couples understand the potential implications for them so they can plan ahead.”