The amount being collected in Inheritance Tax has reached record levels over the last few years, and is projected to hit a new high in 2021. Peter Webb, our Head of Tax Advisory, shares his thoughts on what this means and how you can plan sensibly to reduce your exposure.
It’s long been known that Inheritance Tax (IHT) can leave a nasty sting to even the most comprehensive of financial plans. In the latest report from HMRC the amount claimed in IHT by the UK government between April and August 2021 topped an astounding £2.7 billion, up £0.7 billion from the same period in 2020. July and August’s figures have been the highest months ever recorded.
Over the last two years government committees and the Office for Tax Simplification have both recommended significant reforms to IHT. It’s possible that one of the areas which might be targeted is how gifts can be made; the current fairly generous options could be scrapped in favour of a single annual allowance. With the Autumn Budget on the horizon, it’s likely we may see some attention turned towards IHT, so keeping up to date with any changes in the rules is very important.
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Regardless of possible changes, there are often simple and effective strategies you can use to reduce the IHT you pay including:
- Ensuring you use all available allowances – which currently include leaving your Estate to your spouse, civil partner or charity, along with a range of reliefs for gifting assets
- Passing on assets to your intended beneficiaries during your lifetime
So, it’s useful to consider carefully when and how to pass on your wealth to any intended beneficiaries. You might also be able to make good use of trusts. Don’t forget your investment portfolio too; a financial planner will be able to help you invest in assets that can be free of IHT when certain conditions are met.
It might also be cost-effective to insure against IHT liabilities. With all this in mind it’s important to take action by speaking to your financial planner and keeping up to date with any rule changes.
For help and advice with IHT or any other area of financial planning please contact your nearest office.