Inheritance Tax (IHT) has been making the headlines again this year with the total amount of Inheritance Tax being paid in the 2022-23 tax year set to reach a record high of £6.1 billion.
£3.5 billion has already been raised in the first half of the year as a result of a number of factors, including the soaring property prices. This is an increase of 14% on the same period last year and the largest single-year rise in IHT receipts since 2015-16. The total number of deaths which resulted in an IHT charge has also increased, according to HMRC. It is anticipated that the number of estates paying IHT is set to double by 2026.
Understandably, there are few supporters of the so called ‘death tax’ with most people keen to pass on their assets to their family, and as little to HMRC, as possible. Giving away assets during an individual’s lifetime can often help to reduce the amount of IHT payable but consideration needs to be given as to the nature and value of the assets being gifted, and the rules surrounding such gifts (which have remained unchanged for a number of years now).
In 2019 The HM Treasury ‘Office of Tax Simplification’ (OTS) published their review of IHT and suggested some changes for consideration by the Government. Amongst the proposed changes was an increase to an individual’s annual gifting allowance; a proposal to reduce the so called ‘seven year rule’ (where you must survive any gift you make by 7 years for it to be deemed as out with your estate for the purposes of calculating IHT on death) to five years; and a suggestion that term life insurance should be exempt from IHT without the need to use a Trust, among others suggestions. With the costly challenges the Government has faced over the past few years it may not be a surprise to hear that the suggestions by the OTS have been shelved for the time being.
Following Chancellor Jeremy Hunt’s Autumn statement, the nil rate allowance of £325,000 is to stay in place until 2028 and with no sign of other current rules surrounding IHT changing for a number of years, estates with a value of over £325,000 will be, in most cases, subject to tax on the excess at 40%. There are other allowances and reliefs available depending on the make-up of an estate and the deceased’s individual’s circumstances. With specialist advice and some forward planning, it is often possible to minimise, or even completely eliminate, the amount of IHT due by an estate.
If you would like to review your estate and explore ways to mitigate Inheritance Tax, please contact Corah on 03330 430150 or email cfranco@thorntons-law.co.uk.
