Total tax receipts came in at £448.1billion between April and November this year, which is £106.8billion higher than by the same point a year ago, fresh figures from HM Revenue & Customs have revealed.
Chancellor Rishi Sunak’s mission to rake in more cash for the Treasury appears to be coming to fruition, and looks set to be bolstered further from April next year when National Insurance contributions increase by 1.25 percentage points.
Julia Rosenbloom, a tax partner at Smith & Williamson, said today’s figures were an ‘early Christmas present’ for the Chancellor.
What’s next: Chancellor Rishi Sunak could make further changes to taxes in 2022
With state spending having soared during the pandemic, next year looks set to be another crucial turning point for the tax system, with speculation mounting that something akin to a ‘wealth tax’ could be born.
Here, This is Money outlines how much tax Britons paid between April and November 2021, and highlights how receipts for the likes of inheritance tax, stamp duty and land tax are on the up.
Tax: A chart showing tax receipts over time, according to HM Revenue & Customs
Data: Total tax receipts came in at £448.1billion between April and November this year, HMRC said
While publishing its latest figures, HMRC said today: ‘Comparisons against receipts in the same period last year are not representative as they were heavily impacted by the effects of the Covid-19 pandemic.’
Inheritance tax receipts reached £4.1billion between April and November this year, which is around £600million more than in the same period a year ago, today’s figures from HMRC revealed.
Shaun Moore, tax and financial planning expert at Quilter, said: ‘The latest figures show that in the 2021 financial year up to November, the government collected £4.1billion in inheritance tax receipts, up from £0.6billion in the same period in 2020.
‘The higher tax take is a continued demonstration of the Chancellor’s fiscal drag, which is slowly increasing government tax revenues without seeming to be too much of a burden on taxpayers.
‘With property prices continuing to rise, even though the stamp duty holiday is a distant memory, IHT payer’s bills will rise in future with the ongoing house price inflation.
‘Unsurprisingly, it is London and the South East that dominates the payment of IHT, and given the disparity in house prices in these regions, they will be most at risk from the IHT freeze.’
Following his March Budget, the Chancellor opted to freeze the inheritance tax threshold for five years.
This move is believed to be a conscious effort by Mr Sunak to gradually pull more middle income families into the tax bracket as house prices and stock markets increase.
Three ways to help cut your inheritance tax bill
Experts at Quilter have outlined three ways to help you minimise your inheritance tax bill:
1. Make full use of your nil-rate band and residence nil-rate band
This tax year, you can pass on up to £175,000 of your property tax-free, which is effectively doubled to £350,000 when combined with the allowance of your spouse or civil partner.
That is layered on top of your inheritance tax allowance – or nil rate band – of £325,000, meaning it is possible to pass on £1million inheritance free as a couple.
However, the RNRB only works for those with direct descendants to inherit the family home and is capped at the value of the property being inherited (less any mortgage outstanding), while the UK’s six million cohabitees are less fortunate and cannot claim the combined allowances.
2. Make a gift to family members
Gifts to spouses or civil partners are completely free of IHT and each tax year you can also give away up to £3,000 worth of gifts with your annual exemption, so as a couple you could gift £6,000 a year.
In addition, there is no limit on excess income – above expenditure – that can be gifted. Unfortunately, gifting allowances have failed to keep up with inflation, and the currently soaring inflation rates will do little to help matters in terms of IHT bills.
3. Consider a transfer
If required, you could also consider more significant gifts which would be Potentially Exempt Transfers or Chargeable Lifetime Transfers, but these will take seven years to see the IHT benefit.
As well as reducing the taxable estate value, gifting is particularly useful for estates (above £2million) impacted by the RNRB taper as the gifts can immediately reclaim the extra band.
The property market has been buoyant since the pandemic started, with buyers keen to take advantage of the Chancellor’s stamp duty holiday and flocking to move to homes with more space, both indoors and outdoors.
Overall stamp duty and annual tax enveloped dwellings receipts for April to November came in at £11.7billion, which is £4.5billion more than in the same period a year earlier.
In November, stamp duty land tax receipts reached £1.3billion, according to the Office for National Statistics.
The figure for last month was 46 per cent higher than seen last year, the ONS added.
The November figure also excludes stamp duty land tax devolved to Scotland from April 2015 onwards and to Wales from April 2018, but includes first time buyer’s relief from November 2017.
Property: Stamp taxes and annual tax enveloped dwellings receipts over time
According to the latest figures from HMRC, residential property transactions totalled 96,290 in November, which is 16.4 per cent lower than in November 2020, but 24.3 per cent higher than back in October 2021.
On a non-seasonally adjusted basis, property transactions were 13.4 per cent lower than November 2020 and 22.7 per cent higher than October 2021.
Income tax, capital gains and NICs
Income tax, capital gains tax, national insurance contributions and apprenticeship levy tax receipts for April 2021 to November 2021 came in at £239.2billion, which is £33.6billion higher than in the same period a year earlier, HMRC said.
Receipts from income tax and NIC1 for April to November were £219.6billion, which is £22.9billion higher than in the same period a year earlier.
Tax receipts from self assessment income tax and NICS for the period from April 2021 to November reached £15.5billion, which is £7.7billion higher than in the same period a year earlier.
HMRC said, however: ‘Comparisons against the same period last year are not representative due to payments deferred from July 2020 and January 2021.’
Certain NICs paid by both employed and self-employed workers will rise by 1.25 percentage points from April 2022. From 2023, the health and social care levy in question will be separated out and the exact amount employees pay will be visible on their pay slips.
Value Added Tax, more commonly known as VAT, comprised the biggest tax money-spinner for the Treasury over the last few months, HMRC’s figures showed.
Affecting swathes of businesses, receipts for April to November were a whopping £107.5billion, which is £53.8billion higher than in the same period a year earlier.
HMRC said today: ‘Please note that comparisons against the same period last year for VAT are not representative due to payments deferred and received under the VAT payment deferment policy.’
It added: ‘The higher than usual receipts received in March to November 2021 is due to significant payments of VAT previously deferred as part of the VAT payment deferral scheme.’
From April next year, a temporary reduction in VAT for hospitality firms, holiday accommodation sites and attractions will be coming to an end, meaning the rate will go back up to 20 per cent. There is mounting concern about the financial toll this shift will take on companies battling against rising costs and dwindling footfall.
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