Inheritance tax receipts up 10% year on year*

More and more people are seeing their estate rising over the inheritance tax thresholds. Between April and August 2023, HMRC collected £3.2bn in IHT, around £300m higher than in the same period last year. The higher receipts are likely to be due to a combination of factors including rises in asset values and the freezing of IHT tax-free thresholds, levels which are set to remain frozen until 2027/2028. *Ref:https://www.bdo.co.uk/en-gb/news/2023/inheritance-tax-receipts-up-10-year-on-year.

Reassurance for you and your family

Inheritance tax can be tricky to understand, but its impact can mean less money ends up in the pockets of your loved ones.

ultimately, none of us know how our lives will pan out, or how much wealth we will need to ensure those we cherish most are protected when we’re gone. Yet, while it can be uncomfortable discussing dearth, or money, facing up to these conversations can help secure your family’s financial future and provide you with reassurance.

one thing is for sure, nobody wants to pay HMRC more than necessary.

The average IHT bill per estate is £216,000*. However, we can help you to mitigate against this when it comes to your own estate and give you peace of mind that those you love most can have access to everything you want for them when you are gone.

*HMRC July 2022

What is Inheritance Tax?

Inheritance Tax is a tax on your estate including your property, your money and your possessions.

The current standard rate of inheritance tax is 40% and it is charged on the part of the estate above the current threshold of £325,000 (otherwise known as the ‘individual nil-rate band').

There are extra allowances you can claim. For example, if you are passing on a property to your immediate family, your executors can claim a further £175,000 (as long as your total estate is worth less than £2,000,000). But what is clear is that calculating how much your family will have to pay is not easy.

With careful planning, we can help you take control over your arrangements so that you can pass on as much of your estate as possible to who you want to receive it. Together, we can minimise the amount your loved ones will have to pay.

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.

How to reduce the impact of Inheritance Tax

  • Save more into a pension

    Pensions are a great way to save for retirement, but they can also be a useful estate planning tool, too. Regardless of when you pass away, the money you hav saved into your pension will fall out of your estate, and so shouldn’t be subject to inheritance tax.

  • Buy life insurance and write it in trust

    one option to hel you mitigate a futre inheritance tax bill, and reduce the stres on your family, is to take out a life assurance policy where thesum assured covers any redicted tax bill. It is essntal to write this policy in trust to ensure that your proceeds fall outside of your estate.

  • Put assets in trust

    A trust can provide more flexiblity, creativity and control than a Will on its own because it place the right money, in the ight hands, at the right time. If you place your assets into a trust, they ill not form part of your estate, and so will be exempt from inheritance tax after 7 years.

    For example, you could put assets into trust for the benefit of your grandchildren when they reach the age of 18.

  • Review or write your Will

    Drawing up a new Will, or reviewing your exiting will, is the easiest and most effctive way to express the way you would like your wealth distributed when you die.

    Without a wil, your assets will be distributed on your behalf and may be liable to inheritance tax that might otherwise be avoided.

    A Will is thereforean extremely effective tool to help you save the maximum amount of tax.

  • Consider giving family gifts now

    Gifting is a rewarding way to mitigate an inheritance tax bill. It could be to help your grandchild buy a first car or put down a deposit on a new home, or to help them through University.

    Whatever you decide, gifting provders you with an oportunity to se those close to ou enoy your wealth while you are still here. In doing so, you can also reduce the amount of inheritance tax they will have to pa when you pass away.

    If you give some of your assets away and then live for a further seven years, then your gifts and not liable for inheritance tax.

    To name a few, you can make gifts totalling £3,000 a year completely free of inheritance tax.

    you can gift £5,000, free of inheritance tax, on the occasion of a child’s wedding.

  • Equity Release

    If the vast majority of your wealth is tied up in the family home and you do not wish to downsize in order to release some of your cash, you may wish to consider equity release.

    Equity release has become a valid financial planning and estate planning option for many, with the increase in demand partly down to stricter regulation and generally lower interest rates.

    Releasing the equity tied up in your home could help to reduce your overall estate value and therefore reduce any inheritance tax that may have ordinariiy been due on your estate.