Inheritance tax receipts hit a new high
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 and May 2017 alone, receipts were up over a third on the previous year.
The record tax take is due to three main factors:
- The nil rate band (NRB) has been frozen at £325,000 since April 2009.
- Estate values have been rising, thanks to increasing share and property prices.
- The tax rate above the nil rate band 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.
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 pensions flexibility reforms. Lump sum and 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 escalating 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 pension rules mentioned above.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate estate planning or tax advice. Occupational pension schemes are regulated by The Pensions Regulator.
The information in this article does not constitute advice and should be used for informational purposes only. This content has been provided to Helm Godfrey by Taxbriefs.