Money paid to the government in inheritance tax (IHT) and stamp duty hit all-time highs last month.
Britons paid £571m ($778m) in inheritance tax in July and receipts from property purchases hit £1.3bn. Both figures represent the most ever paid in a single month.
For the period between April and July, HM Revenue & Customs (HMRC) collected £2bn in inheritance tax receipts, an increase of £0.5bn year-on-year.
“The Treasury’s efforts to reinvigorate the property market after lockdown with a stamp duty holiday encouraged thousands of people to accelerate their house-buying plans, pushing stamp duty on property to record highs,” said Sarah Coles, personal finance analyst, Hargreaves Lansdown.
The stamp duty holiday tapered significantly at the end of June, which lead to a home-buying frenzy.
“The horrible rise in deaths from coronavirus at the beginning of this year meant an increase in IHT [inheritance tax] as those estates finally made their way through probate,” said Coles.
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According to her, the HMRC thinks it’s too early to say whether the higher death rate and higher taxes are linked, but given that the last peak in IHT was in October 2020, six months after the first wave, there could be a link.
Julia Rosenbloom, tax partner at Smith & Williamson, said the increases to IHT receipts means the tax is becoming an “increasingly important revenue source for the Treasury.”
“One of the key drivers for the uplift will no doubt be the announcement in this year’s Spring Budget that both the nil rate and residence nil rate bands are to be frozen until at least April 2026, resulting in increased IHT bills for families as more estates are brought into scope on the back of soaring property and share prices,” she said.
Total tax receipts in July hit £67.3bn, the highest since January. Total receipts for the period between April and July were £226.2bn, £76bn higher year-on-year.
Comparisons against receipts in the same period last year are skewed as they were heavily impacted by the VAT payment deferment policy offered to businesses struggling due to the pandemic, HMRC said.
Cash receipts from VAT were £42.1bn. Receipts from income tax, capital gains tax & National Insurance stood at £22bn.
“As the government continues to spend to help rebuild the country following the pandemic, as well as the need to fund other areas such as social care, it will no doubt be casting its net far and wide to boost its coffers,” said Rosenbloom.