Inheritance Tax on the Rise

In the last tax year 2018/2019, inheritance tax receipts to HMRC rose to £5.4 billion which is an increase of around £160 million from the year before.

Further to analysis conducted by the financial services company Canada Life, inheritance tax receipts are further expected to rise to £10 billion a year by 2030 which is almost double the amount recorded this year.

The reason for the jump is thought to be because the number of middle-class home-owning families is expected to increase and therefore more families will be swept into the tax-paying threshold.

Currently, inheritance tax is paid at a rate of 40% on estates worth more than £325,000. However, the new Residence Nil Rate Band provides an additional tax-free allowance when the family home is being passed down to its owner’s children or other direct descendants.

The Residence Nil Rate Band depends on a number of factors, including your marital status and who inherits the family home and therefore careful drafting within your Will may be necessary.

It can be possible to reduce your inheritance tax liability with the correct planning. It’s crucial to use any reliefs, exemptions and allowances available to you. Although nobody likes to think about death, it is essential to start any inheritance tax planning as early as possible.

Due to the complexities of tax legislation, people simply aren’t aware of the steps they can take to reduce the amount of inheritance tax their loved ones will pay when they die. Therefore, it is important to seek proper legal advice when it comes to drafting your Will or dealing with lifetime gifts to ensure that you are using all of the reliefs and tools available to you.

There are also various Trusts available to make sure that more of your money goes to your loved ones whilst reducing the amount of tax potentially payable on your death. Trusts can be a useful tool for many different aspects of financial planning and these can be set up during your lifetime or within your Will.

If you are interested in finding out more about Inheritance Tax Planning please do not hesitate to get in contact with our Specialist Team. You’ll be drawing on the experience and expertise of one of the most established teams on the area.