Andrew Tully comments on latest IHT and CGT receipts in advance of Budget
HMRC has announced the latest Inheritance Tax (IHT) and Capital Gains Tax (CGT) receipts, within their wider tax receipts document > HMRC tax receipts and National Insurance contributions for the UK (monthly bulletin) - GOV.UK
Capital Gains Tax
The CGT figures are included within one figure representing Income Tax, CGT and National Insurance which are £226.8 bn, £6.2 bn higher than the same period last year.
Basic rate income taxpayers are typically subject to lower CGT rates: 10% on gains from most assets and 18% on residential property
For trusts, and for individuals who are subject to higher or additional rates of tax, the higher rates of CGT apply. 20% for most assets and 24% on residential property
Inheritance Tax
IHT receipts for April to September 2024 are £4.3 bn, which is £0.4 bn higher than the same period last year.
This continues the strong upward trajectory over the last few years
The current £325,000 nil rate band has been at that level since 2009. The residential nil rate band was introduced on a phased basis between 2017 and 2020 and potentially gives an additional £175,000 nil rate band (making a total of £500,000) subject to certain rules.
Andrew Tully, Technical Services Director at Nucleus said:
“While CGT is not individually specified within these figures, and the majority is paid in January as part of self-assessment, anecdotal evidence suggests more people are disposing of assets and realising gains in advance of the Budget on 30 October. CGT receipts are therefore likely to increase sharply this year. Growth in IHT receipts continues its upward trajectory following record highs in the last few years.
There are many rumours suggesting changes to both CGT and IHT within the forthcoming Budget. For IHT, changes could be made such as scrapping or updating the rules on agricultural land and business relief. Currently, a person can claim up to 100% relief on the inheritance of agricultural land if it is being actively farmed. This could be reduced, or certain limitations placed on the maximum value of the relief. Changes could also be made to the IHT benefits of holding shares on the Alternative Investment Market (AIM). AIM shares need to qualify for Business Property Relief and be held for more than two years at the time of death to qualify for IHT exemption. However, this may run contrary to the desire to increase investment in UK businesses, to drive further growth.
Advisers can help clients mitigate these taxes by setting up trusts, making use of gift allowances, spousal exemption and using a pension to pass on wealth to family in a tax efficient way. Additionally, equalising assets between spouses & civil partners and making use of the “no gain no loss” disposal could mean all exemptions can be utilised and household income increased if there is a disparity in the rates of tax each spouse pays. Alternatively, people could hold assets within a tax-efficient wrapper such as an ISA, pension or bond.”
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