Inheritance tax among the few to increase in 2020/21

By Legal futures International associate researchers

Inheritance taxes were among the few revenue-generating taxes that increased in 2020/21, thanks to the Covid-19 pandemic.

The tax rose to over £5.3billion, close to the peak of 2018/19 when it hit £5.4billion, although it fell again soon after due from the rise in the zero residency rate bracket and maybe because people had been rushing through probate. in the previous tax year because they feared higher probate fees were coming.

According to national statistics released in April this year, Her Majesty’s Revenue and Customs (HMRC) collected £584.3billion in tax between 2020 and 2021, a 7.8% drop on the previous year.

60% of annual revenue

From 2020 to 2021, revenue from income tax (IT), capital gains tax (CGT), NIC and apprenticeship tax (AL) together accounted for 60% of revenue annuals. Over the past decade, IT, CGT, NIC and AL accounted for an average of 55% of total annual revenue, with VAT and corporation tax being the second largest contributors, contributing on average to 21% and 9% of total revenue respectively.

The Covid-19 pandemic and the government policies it triggered had significant impacts which were visible in the revenue collected on a number of taxes, the full effects of which will continue for some time.

While the closure of pubs, hotels and restaurants led to lower duties on beer and cider, overall alcohol receipts fell from £11.8billion in 2019-20 to 12.1 billion in 2020-21, which can be attributed to people drinking more wines and spirits at home.

Significant drop in air passenger fees

Unsurprisingly, there has been a significant drop in air passenger rights receipts. Over the past 20 years, revenue has grown from £0.8 billion in 2001-2002 to £3.6 billion in 2019-2020. Revenue from 2020-2021 has dropped significantly to 0, £6 billion, reflecting the huge impact of the pandemic on the aviation sector and a drop in passenger flights.

Along with estate tax receipts, the increase is likely due in part to the higher number of estate transfers that have taken place in that tax year, which in turn is the result of more deaths. higher than usual due to Covid-19. While revenues increased in 2020 to 2021 compared to the previous year (although still below their 2018 to 2019 peak), the increase in Covid-19 related deaths offset the effect of the lockdowns reducing deaths from other causes, in particular flu and other respiratory illnesses (although HMRC cannot verify this effect on wealth transfers until full administrative data is available).

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