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Highlights:
- UK government tax receipts rose by £11.1 billion year-on-year to £406.3 billion between April and September.
- Inheritance tax receipts increased by £400 million to £4.3 billion, amid speculation of changes in the upcoming Budget.
- Government borrowing in September reached its third-highest level on record for that month, adding pressure for potential tax increases.
The UK government’s income from taxes rose over the first half of the fiscal year, with total gross tax receipts reaching £406.3 billion between April and September 2024, according to figures released by HMRC on Tuesday. This marks an £11.1 billion year-on-year increase, driven by higher revenues from income tax, capital gains, business taxes, stamp duty, VAT, and national insurance contributions.
Inheritance tax receipts also saw a notable rise, increasing by £400 million to £4.3 billion. This comes amid speculation that the chancellor, Rachel Reeves, may introduce changes to inheritance tax in the upcoming Autumn Budget on 30 October. The increase in receipts follows recent asset value growth and the government’s decision to freeze the inheritance tax threshold at £325,000 until 2028.
There have been rumors that the chancellor may adjust inheritance tax rules as part of efforts to address a £22 billion shortfall in public finances. Wealth Club investment manager Nicholas Hyett noted that inheritance tax has become a "cash cow" for the government, with many anticipating changes that could raise more revenue from estates. Hyett suggested potential tweaks could include making pensions subject to inheritance tax or extending the time period required for gifts to be tax-free.
The discussion around inheritance tax changes coincides with figures showing government borrowing in September reached its third-highest level on record for that month. With the upcoming Budget promising to "fix the foundations," analysts believe some of the rumored tax increases could be part of the final plan.
AJ Bell analyst Danni Hewson remarked that if the government is serious about stabilizing the economy, many of the tax increases speculated in recent weeks may need to be included in the Budget.
