Inheritance Tax receipts

The Office for Budget Responsibility recently reported on an anticipated record-breaking year for HMRC’s receipt of inheritance tax payments.

Inheritance tax is rarely, if ever, front page news or a topic of heated debate when any tax changes are considered. However, under the radar the inheritance tax has subtly and indirectly increased over the past decade and shows no sign of change.

The current inheritance tax threshold for which no tax is payable (known as the ‘nil-rate band’) is £325,000 and has been so since April 2009. It is set as that figure until at least 2026 and one would anticipate an extension beyond that.

Whilst the threshold remains unmoved (before which it had increased incrementally for decades), consider the rising value of an individual’s estates over the same period; for example, the average house price in the UK has nearly doubled since early 2009. Those estates that were likely not close to being taxable in 2009 will have risen in value and likely crept over the inheritance tax threshold.

A slight consolation was the introduction of the ‘residence nil-rate band’ in 2017, wherein a further £175,000 free of inheritance tax is now available should your estate pass a property interest directly to a descendant – something that may only apply to certain individuals and further does not apply to Wills that create a discretionary trust (which were very common before 2008).

Inheritance tax has been described as a ‘voluntary’ tax, in that an effective management of one’s estate can reduce one’s tax liability. There are estate planning measures which can be undertaken, both in your lifetime and in your Will, and so please do get in contact if you wish to discuss.

Thomas Woodlee is a solicitor in the private client team at Barker Gotelee, Solicitors in Ipswich.

Suffolk Private Client Solicitors – for more information on our range of legal services, please call the team on 01473 611211 or email [email protected]