With the General Election campaign increasingly focusing on tax – on property and other assets and income – new figures from HMRC show how frozen tax thresholds are costing individuals dearly.

The HMRC over the weekend released data showing that PAYE Income Tax and NIC1 receipts for April to May 2024 are £77.2 billion – this is £2.8 billion higher than the same period last year.

Inheritance tax receipts for April to May 2024 are £1.4 billion – this is £0.2 billion higher than the same period last year.

Both the Conservatives and Labour have suggested they will have to keep all major tax thresholds frozen until at least 2028 should they win next week’s General Election.

A spokesperson for business consultancy Hargreaves Lansdown, says: “Frozen tax thresholds continue their slow squeeze of our finances, with neither main party committing to releasing the pressure. The much-trailed cuts to inheritance tax didn’t make the Conservative manifesto either. 

“For years, it was strongly suggested Conservatives would slash the tax, which is growing strongly, though the tax take overall remains small. Last year was a bumper year, with receipts hitting almost £7.5bn and the year has already started strongly at £1.4bn.

“If assets such as our home and savings are worth more than the IHT nil rate band (currently £325,000) and the residence nil rate band (£175,000), then our families could get hit with a bill. However, in many cases inheritance tax is not levied on SIPPs and pensions, so it’s a very tax efficient way to pass money down through the generations. 

“If you were to die before the age of 75 then your beneficiaries wouldn’t pay income tax on it either, though they would if you were over 75. It’s a rule that brings essential peace of mind to know that your family won’t be left struggling should you die unexpectedly. However, there are many who believe the treatment is overly generous and we could see tweaks made in the coming years.”

Hargreaves Lansdown says it’s important to note that income tax doesn’t stop at just taxing take home pay each month. The consultancy states: “Once you’ve used your personal savings allowance, you also pay income tax on savings accounts. For those who have been pushed into the higher rate tax bracket, this doesn’t just mean paying a higher rate of tax on your savings, it also means your personal savings allowance has halved overnight to £500, so you pay this higher rate on more of your savings too.”

The wealth management service Wealth Club says that the IHT take could increase should the Labour Party win the election – a pledge to restrict non-doms from shifting money offshore is expected to raise £430m a year, equivalent to a 6% increase in the overall inheritance tax take. 

It says inheritance tax has been a feature of several manifestos and campaigns this election.

Labour’s pledge is to end the use of offshore Trusts to avoid inheritance tax, generating an estimated £430m in income for the Treasury annually; while the Conservatives’ pledge is to retain inheritance tax reliefs for family farms to ensure they can be passed down without tax burdens.

Wealth Club investment manager Nicholas Hyett says: “Labour are targeting non-doms who shelter their money abroad and the Conservatives have accused Labour of harbouring secret plans to go further – with inheritance tax notably absent from the list of taxes in the Labour manifesto that will not be increased. Meanwhile Reform have promised generous inheritance tax cuts as it looks to win over voters.

“The reality is that inheritance tax would likely rise under either of the two main parties. Freezes on thresholds over the last few years, partnered with decades of house price rises have brought more and more estates into the tax band. Attempts to increase taxes on wealthy non-doms may be politically popular, but most of the tab will still be picked up by families who would not consider themselves particularly rich. 

“For these families, their standard of living hasn’t changed, indeed inflation means it might have gone backwards, but frozen allowances mean the government now considers them wealthy enough to face inheritance tax.”