HMRC has published the latest tax receipt data: HMRC tax receipts and National Insurance contributions for the UK - GOV.UK
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown:
“The tax take continues to soar as fiscal drag draws more people into paying more tax and at higher rates. Getting that pay rise, bonus or promotion is a source for celebration but could also tip you into a higher tax band - this not only leaves you paying tax at a higher rate but it can also mean you lose valuable tax-free allowances and hike up the tax rate you face on savings interest or capital gains. You may also find you stand to lose valuable benefits such as tax-free childcare or become subject to the High-Income Child Benefit tax.
There are things you can do to soften the impact of these frozen thresholds. Making the most of your ISA allowances can shelter your money from savings interest, capital gains and dividend tax. Meanwhile pension contributions can play a role in keeping your income below tax thresholds which can allow you to keep key benefits as well as paying less tax.
Inheritance tax
The clock continues to tick down to unused defined contribution pensions being part of your estate for inheritance tax purposes. It’s a change that will boost the receipts of a tax that has already surged in recent years. The good news is that most people won’t be affected but those who are will be making plans to shield their loved ones as much as possible.
Some will start making gifts now in a bid to reduce the value of their estate. There are various allowances that can be used whereby the money leaves your estate for inheritance tax purposes immediately. Other gifts - known as Potentially Exempt Transfers - leave your estate after seven years. Careful notes will need to be made outlining your gifting behaviour so your family can provide evidence later if needed. It’s also really important not to gift away too much too soon. You don’t know how long you might live and you don’t want to put yourself in a position where you find yourself struggling. Speaking to a financial adviser can be useful in helping you to navigate inheritance tax so you can strike the balance of helping others while living well yourself."
Notes to Editors
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