Taxpayers paid £600 million more in Inheritance Tax last year than they did in the same period a year earlier.
The figures from HMRC show that between April and October 2021, Inheritance Tax receipts totalled £3.6 billion compared with £3billion in the same period in 2020 – a rise of 20 per cent.
Inheritance Tax is not just for extremely wealthy people to worry about.
Rising property prices mean Inheritance Tax receipts paid to the Exchequer continue to rise and with the threshold frozen at £325,000 until 2026 it’s expected many more are being caught out as it’s no longer uncommon to own a home worth that amount or more.
HMRC collected £5.13bn in Inheritance Tax in 2019-20 and the amount of Inheritance Tax collected in the future is expected to be well in excess of £6bn by 2023-24.
What can you do?
Thinking about how your assets will be distributed after your death is not always a comfortable thought, however, it is one of the most important and valuable things you can do.
At the very least you should make a will to clarify your wishes. If you don’t the state will take over and distribute your estate according to a formula set out in the rules of intestacy. The results are not always what you would expect and can also potentially create unnecessary tax consequences.
There are currently many ways Inheritance Tax can be reduced, offset or eradicated.
Potential considerations could involve simply giving your money away to reduce your estate such as lifetime gifts or through regular surplus income, using life assurance policies to protect any tax liabilities, through to setting up trusts to shelter your assets.
Solutions do not, however, have to involve a reduction in your lifetime benefit of funds or assets, it is a case of determining what is the right solution for each individual and family.
The rules around Inheritance Tax can be complex, and the amount of tax, and even the overall rate that will be paid, will depend on how your finances are structured during your lifetime, how you dispose of your assets and to whom you leave them.
Get the right advice
Seeking independent tax and financial advice can help you pass your assets to the people you want to benefit and potentially mitigate some or all of the Inheritance Tax liability.
With the right planning and support some of the Inheritance Tax receipts currently payable by individuals are thereby able to be legitimately avoided or reduced.
It is worth noting that the pandemic and the unprecedented recent borrowing by the Government means that all taxes, allowances, and reliefs both now and in the future are likely to be under closer scrutiny.
One such area is likely to be that of Inheritance Tax. In fact, more than two years ago, independent reports were commissioned by former Chancellor Philip Hammond from the Office of Tax Simplification (OTS) on simplifying the Inheritance Tax regime.
The OTS has issued two reports to date, but no action has yet been taken in any subsequent Budgets.
A Chancellor with an eye towards a ‘levelling-up’ agenda and a need for more revenue could finally decide to act in either the coming or future Budgets.
How can we help?
At Armstrong Watson, our quest is to help our clients achieve prosperity, a secure future and peace of mind.
Our view for anyone considering taking advice around estate and legacy planning is that now may be a good time to do so whilst all existing reliefs and allowances remain available.
Acting sooner rather than later puts you in control and is the opportunity to ensure you leave as much of your wealth as possible, to the people you want it to go to. Please get in touch with Justin Rourke on 01768222071 or email justin.rourke@armstrongwatson.co.uk
