24 October 2023
The latest data on HMRC tax receipts and National Insurance contributions (NICs) show another healthy increase in total HMRC receipts over the period April 2023 to September 2023, continuing the upward trend in recent years.
The total amount paid in personal taxes to the Treasury, which includes income tax, NIC, capital gains tax (CGT) and inheritance tax (IHT), is over £220bn from April 2023 to September 2023. This is nearly £12bn more than the same period last year, an increase of close to 6%.
When looking at these tax increases per UK household, the average household has paid £422 more in the period from April 2023 to September 2023, than the same period in 2022.
Just looking at IHT in isolation, there has been an increase in IHT receipts of almost 11%. As a result, one could be forgiven for thinking that the country’s finances are being propped up by an ever-increasing tax burden on individuals.
Whilst rumours still abound of a cut in IHT - possibly the most unpopular tax borne by individuals in the UK – in reality such a cut could benefit as few as 45,000 individuals (being the number of individuals and estates actually liable to IHT in the 2022/23 tax year) each year. However, this figure does not reflect the fact that those most able to mitigate their IHT liabilities through careful planning are the most wealthy, whilst many homeowners with perhaps little other wealth, are increasingly drawn into the IHT net through the growth in house prices. There is a fairly robust argument for increasing the IHT nil rate band to a level which would at least remove this burden on those households.
So, what would be more beneficial to UK individual taxpayers? In response to the by-election results last week, it has been reported Mr Sunak is considering an increase to the higher rate income tax band. That may undo some of the increased tax pain being felt by households, but many will want him to go further. That might include calls for an increase in personal tax allowances, including savings and dividend allowances, and NIC thresholds to bring them back to a more realistic level, in line with what they would now have been if they had continued to rise with inflation.