Watch out for the Inheritance Tax pitfalls
11 March 2022
The latest Inheritance Tax (IHT) Statistics, published by HMRC in July 2021, show that despite the relatively recent introduction of the residence nil rate band, IHT receipts received by HMRC during the tax year 2020/21 were £5.4 billion. That's an increase of 4% on the previous year.
With the nil rate band and residence nil rate band frozen at current levels until at least 5 April 2026, and house prices and asset values continuing to rise, it is likely that this represents the beginning of an upward trend in the tax take from IHT.
Once only considered a tax on the truly affluent, IHT now affects more estates (and families) than ever.
It will undoubtedly come as a surprise to some that a large proportion of their wealth might actually have to be sold in order to meet the tax liability on death. This includes all assets, from the family home, investments including Individual Savings Accounts (ISAs), life assurance plans not held in trust and even possibly old family heirlooms.
Business owners may be aware that their business assets could benefit from Business Relief for IHT but may not have realised that the value of their business assets can cause them to lose the residence nil rate band.
Like all forms of tax planning, IHT mitigation strategies that have been put in place in the past or that may work in the present are vulnerable to continual legislative change and a regular review is essential to avoid the pitfalls.
For a complimentary guide covering wealth managment, retirement planning or Inheritance Tax planning, get in touch.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.