What you need to know about Inheritance Tax
Most people understand that, although it is an unfair tax, if you have a large estate you end up paying Inheritance tax (IHT), or rather your estate does when you go.
More and more people are becoming liable to pay Inheritance Tax, in fact it’s almost 1 in 25 estates, even though many could avoid it very easily with the right planning. Receipts from estates paying Inheritance Tax in the tax year 2021/22 alone were £6.16 billion, up £739 million on the previous year. The ‘Office for Budget Responsibility’ are predicting Tax will be £8.36 billion by 2026.
Reduce what you pay
House price increases over the last year have been one of the main reasons for the rise, with the UK average house price increase of 12.8% over the year to May 2022 (data from Census 2021), it is expected that they will continue to be so. However, the government have provided lots of legal ways to mitigate tax (in addition to just giving it away), which is why I am always amazed by how few people do little, or nothing, about reducing it.
There are many other allowances and acceptances that can be utilised with pre-planning that can save £millions more and with expert advice these can be tailored to individual people, ensuring that you are making the most of what is available to you. Inheritance Tax is 40% above certain levels of estate value, but not everyone is entitled to every allowance.
It is true that planning should be done as early as possible, as with all financial matters, this certainly is helpful. Planning early gives you more flexibility and options, but even last-minute planning could reduce an estate liability. Generally, ‘last minute’ is considered to be about a month before death for many people.
So, if you have a loved one who may not be expected to have a long life ahead, then I urge you to contact us or someone like us, who understands estate planning and is highly qualified to advise you. Please don’t assume that your loved ones have everything sorted, or equally that it is too late to sort, as that is rarely the case. It is always worth the conversation. As we mentioned above, Inheritance Tax is 40% above certain levels of estate value, and you could save this against much of the estate you are trying to protect. Have a little light shed on your situation today!