11 July, 2017
Latest reports show that HMRC collected over £5.1bn in inheritance tax over the last year, which is the first time in history this figure has exceeded the £5bn mark. So why the increase? One of the main reasons can be put down to the fact that property prices, particularly in the South of England have continued to rise yet the Inheritance Tax allowance has remained the same at £325,000 for the past eight years.
When Inheritance Tax was introduced, it was a tax aimed at the wealthy. However, over the years, the tax threshold has not risen in line with inflation or the increase in property prices and therefore it is now a tax paid by many middle-class families who would certainly not class themselves as wealthy.
Projections from the Office for Budget Responsibility (OBR) reveal the number of family estates on which inheritance tax must be paid has more than quadrupled since 2010, with the number up from around 10,000 to well over 40,000.
With the introduction of the new Residence Nil Rate Band in April of this year, some estates may now find that their potential inheritance tax bill has been significantly reduced or even disappeared. However the new tax allowance will not apply to all individuals and has strict criteria which must be met in order for an estate to benefit from it.
So what can you do? There are ways that wealth can be passed on during your lifetime or even on death without it being subject to tax, however the rules surrounding such gifts are complex and we would recommend that you seek legal advice before embarking on any potential tax planning to ensure that it will be effective.
If you would like any further advice, please do not hesitate to contact Jennifer Wilkinson in our Wills, Probate, Tax and Trusts department or alternatively call Freephone 0800 975 2643 or send any question through to Forbes Solicitors via our online Contact Form.