Inheritance Tax Sees Treasury Gain £749m in July Alone: Financial Update

In a momentous fiscal event, the UK Treasury amassed a staggering £2.8 billion in inheritance tax during the initial quartet of months in the ongoing tax year. This feat represented an increase of nine percent, or £230 million, compared to the same duration in the preceding year. The month of July alone contributed £749 million, making it a top contender for the most substantial monthly collection ever.

Frozen Tax Thresholds and Their Implications

This trending surge in inheritance tax revenues can be partly attributed to unchanging tax limits. For well over a decade, since 2009, the inheritance tax threshold has remained at a constant £325,000 and this number is set to persist at least until the spring of 2028.

Property or inherited assets exceeding this limit face a taxing rate of 40 percent. An additional £175,000 allowance is granted for residences passed on to immediate offspring.

The Effects of Economic escalation

As the value of property and other assets escalates, an increasing number of families find themselves within the inheritance tax bracket, a phenomenon referred to as fiscal drag. This ongoing situation fuels conjecture that Chancellor Rachel Reeves might consider an upward tax revision to bridge a £22 billion deficiency in public funds.

These inferences are fuelled by record-breaking tax receipts for July, going up to a whopping £82.5 billion, as reported by Joe Neal from Blick Rothenberg, a tax firm. Despite the upswing in tax collections and rising corporation tax figures, Mr. Neal observed caution regarding the government’s financial future.

“A colossal £32.7 billion of July’s total tax intake came from income tax alone. The self-assessment share amounted to £12.9 billion – a considerable rise from the £11.8 billion mark of the previous year. This seems to indicate a drop in reduced payments by self-employed individuals, suggesting that small businesses might be finding more profitable grounds,” observed Mr. Neal.

He also drew attention to the fact that PAYE receipts for the first quarter of 2024/25 showed an impressive increase of five percent over the previous year, a hike primarily attributed to above-inflation wage revisions in the public sector.

In the wake of growing profitability, corporation tax receipts exhibited an 8.6 percent surge compared to Q1 of 2023/24 and a whopping 22.5 percent when stacked against the rates from 2022/23. However, despite these promising trends, Mr. Neal alerts that financial stresses could coerce the government into additional tax escalations.

“With spending needs announced to be ‘much worse than expected’, we may witness further tax augmentations in the October budget. With taxpayers already buckling under the weight of the existing tax burden, such a hike could act as a catalyst for a potential exodus of affluent individuals and big corporations from the UK, causing Labour’s handsome tax income to evaporate rapidly”, Mr. Neal observes.

We have sought response and commentary from the Treasury on these matters and await a reply. Express.co.uk