HMRC confirmed today that IHT receipts for April 2021 to July 2021 were £2.1billion. The Government also confirmed higher receipts over the last year or so are expected to be higher due to the impact of coronavirus, although this cannot be verified until full administrative data becomes available.
The recent run of increases to monthly IHT receipts means the tax is becoming an increasingly important revenue source for the Treasury.
One of the key drivers for the uplift will no doubt be the announcement in the next Budget that both the nil rate and residence nil rate bands are to be frozen until at least April 2026, resulting in increased IHT bills for families as more estates are brought into scope on the back of soaring property and share prices.
As the Government continues to spend to help rebuild the country following the pandemic, as well as the need to fund other areas such as social care, it is quite likely that personal taxes, including IHT and CGT, could be in for a massive overhaul given the amount they raise for the Treasury on an annual basis.
Increases to IHT charges could affect many and some may need to go as far as selling family homes to pay their IHT bills. Starting tax planning as soon as possible will mean that people can make the most of their current allowances before any new reforms are introduced.
Families should look carefully at the different options available, such as making gifts and investing tax-efficiently, which may help reduce or eliminate an IHT bill. Early planning will ensure you pass more assets on to your loved ones and causes you care about, rather than it going to HMRC
Paying IHT comes at the worst possible time. Families are still reeling from bereavement when they have to go through the administrative nightmare of probate, and then work out how to pay the tax bill. THE MORE YOU CAN PLAN FOR THIS TAX IN ADVANCE, THE LESS PRESSURE IT WILL PUT ON YOUR FAMILY WHEN THE WORST HAPPENS. IT IS SO IMPORTANT TO CONSULT EXPERTS IN THE SUBJECT
You might, for example, give gifts during your lifetime. You have an annual gift allowance and can give gifts of any size, and as long as you live for seven years afterwards, they are counted as being out of your estate for IHT purposes. Alternatively, you could consider a whole of life policy written in trust, which will be paid outside of your estate and can be used to meet the cost of the tax.
Today’s data from HMRC showing an increasing uptake in receipts for inheritance tax highlights how easy it is for individuals and couples to generate a potentially large inheritance tax bill when they die, despite not being what they may perceive as ‘wealthy’.
Latest figures clearly show that MANY ARE STILL NOT SEEKING PROPER FINANCIAL PLANNING FROM EXPERTS which can make it possible to pass on more of their wealth to their family.
Many fear that IHT could be targeted by the Government over the coming years to cover the costs of coronavirus.
The Chancellor’s subtle freeze on the nil rate band and the residence nil rate band at the last Budget is having the effect desired. It is dragging more and more people into paying IHT, particularly now asset prices have swelled in the past 12 months or so.
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