Whilst inheritance tax may never have been popular amongst those passing on wealth, recent figures suggest that it’s having a significant impact on Treasury receipts.
According to official government data, almost £5 billion was collected in inheritance tax during the last tax year, representing an increase of 4% from the previous 12-month period.
Many experts have commented on the increasing number of middle-class families paying more tax because of increasing house prices. This has been seen to particularly affect properties in the South of England, with stamp duty also believed to be preventing many elderly people from downsizing.
From 2009 onwards, inheritance tax has been set at 40% on assets above the £325,000 threshold. Whilst house prices have dramatically increased during the last decade, the threshold and 40% rate have remained in place. This means that a larger proportion of estates have been affected in recent years.
Drawing attention to the issue, forecasts from the Office for Budget Responsibility (OBR) show that the number of estates on which inheritance tax is paid has increased four-fold over the last seven years.
In a bid to reduce the amount of inheritance tax for couples passing on their main residence, the residence nil rate band was introduced in April 2017. This permits couples to pass properties with a value of up to £1 million tax-fee if bequeathing to direct descendants. This new allowance will rise by £25,000 per year until it reaches £175,000 in the 2020/21 tax year.
Whilst inheritance tax is inevitable, efficient planning can minimise the amount that you pay. By speaking to one of our expert team, you can make sure that your wealth is passed on to your loved ones in line with your wishes, giving both you and your family peace of mind.
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