Inheritance tax hits a record high

Inheritance Tax (IHT) receipts for April 2022 to February 2023 hit a record £6.4billion – almost £1bn higher than in the same period a year earlier.

The announcement by HMRC has renewed calls for action to be taken on the long-frozen tax threshold.

The IHT nil-rate band, which is the maximum amount a person can inherit before paying the tax, has been stuck at £325,000 since 2009 – despite rising house prices.

Last November, chancellor Jeremy Hunt announced that the nil rate would remain frozen until at least April 2028, despite inflationary pressures.

And it is important to point out that the IHT gifting allowance of £3,000 a year has also remained unchanged since 1981.

Add those lengthy freezes to recent property price rises and it is little wonder that experts say that an ever-growing proportion of estates are likely to become liable to pay IHT, despite the slowdown in the housing market.

It is also little wonder that the Office for Budget Responsibility has also updated its forecasts for future IHT receipts.

It is now estimating that between 2022/23 and 2027/28, the Treasury will receive nearly £3bn more than previously forecast after last November’s budget statement.

There are ways in which the existing IHT regime can currently benefit your own estate planning and ensure a fairer distribution of your assets through your family.

As with most tax issues the key here is to start your planning early and to get a good handle on your estate. Having a clear strategy is also important.

The £3,000 a year annual gift allowance is good place to start. So is reviewing your will and making sure your assets will be dispersed the way you wish.

The first question you should be asking is: “Is my estate planning up to date?”

To discuss any issues around IHT or other tax issues please contact me on 01772 430000