The steady rise in receipts peaked in October 2020, with receipts in that month far exceeding the previous five years. Commenting on the latest data, tax and wealth specialist at Canada Life Neil Jones suggested it shows Inheritance Tax (IHT) “has not been immune” to the effects of the COVID-19 pandemic.
Julia Rosenbloom, tax partner at Smith & Williamson, also commented on HMRC’s latest IHT figures.
“HMRC’s latest tax receipts, released last week, show a marked increase in the amount of Inheritance Tax (IHT) collected in the final few months of 2020,” she told Express.co.uk.
“IHT receipts steadily rose from August onwards and peaked at a five-year high in October.
“While this pattern of higher receipts in the winter months is usual, this latest rise was significantly more pronounced last year and this is likely to be due to the impacts of COVID-19 in the Spring.”
Ms Rosenbloom went on to discuss how some may opt to ensure their financial affairs are in order during their lifetime.
“Inheritance Tax continues to be a worry for many, particularly when the bill has to be settled within six months of a loved one’s passing,” she said.
“However, there are some quick and simple steps we can all take to ensure our financial affairs are in a better shape for any unexpected events.
“These include making a will to ensure the money goes where you want it to, making gifts to loved ones while still healthy enough to do so and making the most of government available tax reliefs.”
With the coronavirus pandemic having prompted Chancellor of the Exchequer Rishi Sunak to announce unprecedented public spending such as on emergency measures including the furlough scheme and the Self-Employment Income Support Scheme (SEISS), there’s been plenty of speculation about potential tax changes in the future.
“For the coming year, it is likely IHT will continue to rise – particularly if asset values increase and if any IHT changes are made in line with the Chancellor’s commissioned review into IHT last year,” commented Ms Rosenbloom.
“You might want to consider your tax planning now before any changes we might see in forthcoming Budget in March.”
For those who are tax planning for the future, Tom Bostock, financial planner at 7IM, has identified some some key areas prone to pitfalls for the less experienced.
Among them is the need to watch out for other forms of tax liability.
“Whilst calculating the IHT liability on an estate will likely be the focus of attention, it is important to also be aware of the Income Tax and Capital Gains Tax (CGT) liabilities,” he said.
“Dealing with an estate through to probate being granted can take many months, if not years, to be finalised.
“During this period, assets within the estate may continue to generate income (such as rental property and certain investment assets).
“This continues to be liable to income tax and as such, tax returns need to be completed and submitted.
“With respect to CGT, the current position is that underlying gains, for example within investments or property, are eliminated on death. As such, executors may completely disregard CGT.
“However, let us consider the scenario where markets rise rapidly, for example, recovering from the depths of a crisis as we saw in the second half of 2020.
“If an estate with large investment portfolios is being managed through this period, the gains realised from date of death to probate being awarded need to be accounted for. If these happen to breach the available allowances, CGT would be due.”