According to the Office for Budget Responsibility, more families are now paying Inheritance Tax (IHT) than at any time since the rules were introduced in 1984.
In October, the latest publicly available data on tax receipts showed 2012 to 2013 saw inheritance tax paid on 17,900 estates with a total bill of £3.05bn – a 15 per cent increase on the £2.65bn total paid in the previous tax year.
The Office has forecast the number of deaths subject to inheritance tax will more than double in the period between 2013-2014 and 2018-2019, reaching 54,500 – or 10 per cent of deaths.
The main reason is the substantial and projected continued increase, in house prices.
In the 2015 Summer Budget, the government announced it will phase in a new residence nil-rate band from 6 April 2017, when a residence is passed on death to a direct descendant.
Together with the inheritance tax nil-rate band – set at £325,000 – and the ability to transfer unused main residence nil-rate band to a surviving spouse or civil partner, this allowed Chancellor George Osborne to claim there will be an effective inheritance tax threshold of £1m in 2020 to 2021.
But as with all reliefs it is easy to miss out and does not help anybody without children. It is therefore important that IHT is a tax to be considered by everybody with property.
Interestingly, in Canada and Australia their IHT equivalent has been abolished. Australia did so after somebody stood for Parliament on the “Abolish IHT ticket” and was elected with a huge majority.
In the meantime, the advice is to look at making effective lifetime and Will plans to reduce your family’s potential IHT liability.
According to another recent study, older people are already doing this. Many are passing on their savings to help younger family members pay off debts, cover the cost of university or fund housing deposits and in doing so are potentially helping them avoid inheritance tax (IHT).
The research found that almost half of over 55s have gifted money to children or grandchildren in the past six months, many with a view to lessening the tax burden these beneficiaries face when the parent or grandparent dies.
At JW Hinks, our Lifestyle Services team can provide you with comprehensive advice. We will work with you to identify ways to minimise your inheritance tax liabilities, reviewing your estate – including personal and business assets – and your will, to ensure that they are as tax-efficient as possible.
Contact us for more information.