2017/18 has seen the UK lose out on £5.4b on inheritance tax (IHT) rise. The ‘record high’ intake has increased 13% from the previous year of £4.7 leaving taxpayers losing out on more than ever before.
The freeze on inheritance tax threshold which remains at £325,000, rising stock markets and residential property rises are said to be the culprits for such an increase. And though this has also led to families paying higher bills, the residence nil band is set to increase from £25,000 from 2018/19 alongside the slowdown of inflation could see the levelling out of IHT.
Recent figures published by the HMRC show IHT receipts have increased in average of 11% since 2009/10 when the IHT was frozen.
Therefore, we advise that it is even more important to seek professional advice about estate planning to ensure their estates remain as tax efficient as possible to avoid losing out on substantial portions of individuals’ wealth to the HMRC.
Below are some steps that can be taken to minimise the amount of IHT you will lose out on:
Making use of your annual exemption – In each tax year, you can make a gift of up to £3,000. On top of this, any unused exemption from the previous tax year can also be used.
Gifts from income – You can make regular gifts out of income completely IHT free. These gifts must be from your post-tax income, be habitual, and leave you sufficient income to maintain your standard of living. (However, this excludes income being drawn from Life Assurance Bonds).
Marriage Gifts – Parents and Grandparents can make one-off gifts on the marriage of their children/grandchildren (up to £5,000 and £2,500 respectively). If you are not a parent or grandparent, you can still gift up to £1,000 with this exemption.
Small Gifts – In each tax year, you can gift up to £250 to any number of people, free of IHT, as long as they have not received a gift, which uses one of the other exemptions listed above.
Donations to charities or political parties – gifts to these types of organisations, either during your lifetime or via your will, are exempt from IHT.
Why not get in touch with our Tax team to get some confidential advice about your estate, and help with what you can do to alleviate your potential IHT liabilities for the future.