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Inheritance Tax (IHT) is raising more than ever according to HM Revenue & Customs. How much do you want to contribute?
IHT receipts broke through the £5 billion barrier for the first time in the 12 months to May 2017. In April & May 2017 alone, receipts were up over a third on the previous year.
The records tax take is due to three factors:
- The nil rate band (NRB) has been frozen at £325,000 since April 2009
- Estate values have been rising, thanks to increasing share & property prices
- The tax rate above the NRB remains at 40%
IHT tax payments will continue to grow, according to the Office for Budget Responsibility projections – with £6.2 billion of tax expected to be paid in 2021/22.
Mitigation options: There is little chance that any fresh legislation to dilute IHT’s impact will appear any time soon, but two measures do offer some scope for mitigating the impact of IHT:
- The residence nil rate band (RNRB), the first phase of which came into force in April this year at a level of £100,000 for each individual. The RNRB will ultimately mean that from April 2020 a married couple (or civil partners) may be able to pass on a joint estate of up to £1 million with no IHT payable.
- Pension Death Benefits were granted highly favourable IHT treatment as part of the 2015 pension flexibility reforms. Lump sum & survivor’s pension benefits payable on death are normally free of IHT, although the beneficiary will be subject to an income tax charge if death occurs on or after age 75.
If you do not want your estate’s beneficiaries to suffer from that increasing IHT tax take, the sooner you start planning the better. If you have already undertaken some planning, then you might well need to review matters in the light of the RNRB and mention rules mentioned above.
Please Note: The value of tax reliefs depends on your individual circumstances. The Financial Conduct Authority does not regulate estate planning or tax advice, and tax laws can change.
This article is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication.
Sterling McCall Limited incorporating the trading style Sterling McCall Wealth Management, is an appointed representative of Tavistock Partners Limited which is authorised and regulated by the Financial Conduct Authority. FCA Registration No: 449607