Inheritance tax: exceptional tax as inflation soars ‘leaves a bitter taste’ | Personal finance | Finance

New data released today by HMRC showed Inheritance Tax (IHT) receipts from April to July 2022 were £2.4bn – £0.3bn more than the same period recorded a year earlier. Cash receipts were also higher due to income tax, capital gains tax and national insurance contributions.

Amid a cost of living crisis and runaway inflation, this could put further pressure on the pockets of Britons.

Myron Jobson, Senior Personal Finance Analyst at Interactive Investor, said: “The windfall tax hike demonstrates that inflation – both wages and house prices – is trickling down to revenue coffers.

“It can leave a sour taste at a time when people can’t pay energy bills.”

First, there’s the idea of ​​income tax – which is a levy paid by large numbers of Britons on their income.

READ MORE: Bank of England could more than double rates to fight inflation

It was, however, somewhat mitigated by the decision to raise the national insurance threshold in July – but only for some people.

The frozen thresholds do not only have an impact on income tax, it should be noted.

The British are also feeling the brunt of the freezing of inheritance tax thresholds, often hated by the British.

Andrew Tully, technical director of Canada Life, pointed out that the frozen thresholds mean that HMRC has already doubled its tax levies on the IHT over the past 10 years.

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He continued: “This surge will be partly due to the continued increase in property prices, as residential real estate accounts for the largest share of most areas.

“The zero-rate band and the residence zero-rate band are frozen until at least April 2026, so we can expect to see IHT revenue continue to grow.

“This is a tax that no longer just affects the wealthiest in society and is increasingly catching up with families who are unprepared or simply unaware.”

Currently, only one in 25 estates pays inheritance tax, or 4% in the UK.

However, the freezing of thresholds coupled with inflation and rising property prices could bring more properties into the taxman’s sights.

The question could be addressed by whoever becomes the next Prime Minister – Liz Truss or Rishi Sunak.

Alex Davies, CEO and Founder of Wealth Club, added: “Inheritance tax reform is a potential vote winner for Rishi Sunak and Liz Truss among Conservative Party members, but it’s hard to imagine that. ‘She’ll be at the top of their agenda in any emergency budget once they come to power.

“Lowering inheritance tax will do nothing to alleviate the cost of living crisis hitting the country, and it is also a real cash cow for the Treasury.

“With inflation soaring, the effect of the benefit freeze will only increase in the years to come, unless the new Prime Minister chooses to intervene.”

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