Inheritance tax receipts rise to £5.2bn

 

 

Inheritance tax (IHT) receipts hit a record high of £5.2 billion in 2017/18, according to statistics published by HMRC.

 

This was a year-on-year rise of 8%, and continues a long-term pattern as IHT receipts have been increasing by an average of 10% a year since 2009/10.

 

The report says this is partly due to rising estate values, as well as the Nil Rate Band - the threshold at which people are liable to pay IHT on their estate - being frozen at £325,000 in 2009.

 

However, these figures do not yet reflect the full impact of the Residence Nil Rate Band, which was introduced in April 2017 to provide an additional IHT allowance to eligible individuals passing on a family home to direct descendants.

 

Earlier this year Philip Hammond initiated a review of IHT, arguing that the system is ‘particularly complex’ and in need of simplification.

 

A number of areas are thought to be under scrutiny including transfers that are potentially exempt from IHT. The current rules state that after seven years, any gifts are considered out of your estate for IHT purposes. This rule is open to misinterpretation and can encourage people to make large gifts before it necessarily makes financial sense for their own future. There has been speculation that this could be reduced to two years.   

 

There is also pressure to alter the Residence Nil Rate Band as it discriminates  against those who do not own their own home, are not married or in a civil partnership and do not have children. Critics say it would be fairer to simply raise the current £325,000 allowance for everyone. Initial results of the review will be published in the autumn.

 

A recent survey revealed that 87% of those questioned claimed to have no IHT strategy in place, despite planning on distributing their estate to family and loved ones. The research also revealed a number of misconceptions, for example 40% of respondents did not think that their main home was liable for IHT.   

 

Lentells provide a discreet estate planning service. As well as drawing up or reviewing your Will we can advise on making full use of exemptions and lower tax rates on lifetime transfers, utilising tax efficient investments and optimising lifetime transfers between spouses. Please contact us for a free informal meeting.