Ever more families are facing inheritance tax (IHT) bills as frozen thresholds push more estates into liability.<\/p>\n
HMRC took \u00a31.5 billion in IHT receipts in the first two months of the current tax year, according to its latest data.\u00a0This is an uptick of just under \u00a3100 million on the comparative period last year (a rise of 7%) and marks another consecutive increase for the Government from the duty, which taxes the value of estates that fall outside of protected allowances.\u00a0Rises are being followed closely, particularly as pensions are set to be factored into estate calculations from 2027 \u2013 which could send HMRC\u2019s receipts soaring even higher.<\/p>\n
Why does IHT tax\u00a0keep rising?<\/strong><\/p>\n IHT is a tax on the value of your estate when you die. It comes with a variety of rules and allowances which all factor into what your family may finally pay when your estate passes down.<\/p>\n Although various thresholds exist, the basic \u00a3325,000 one has not changed since April 2009.\u00a0This means the Government has benefited from 16 years of \u2018fiscal drag\u2019 on the allowance.\u00a0As individual estates and wealth rise in value in line with inflation, more and more have tipped over the limit levels. This means steadily over time the Government has been able to earn more from IHT without actually changing its own rates.<\/p>\n How to mitigate IHT<\/strong><\/p>\n The introduction of pensions into IHT calculations from 2027 is a significant issue for families hoping to minimise their IHT liability.\u00a0There are fortunately ways to mitigate IHT, through the use of allowances, gifting and other thresholds. But it requires careful financial planning to get right and ensure you don\u2019t fall foul of the rules.<\/p>\n Beyond the basic \u00a3325,000 Nil Rate Band is the Residential Nil Rate Band. This is currently set at \u00a3175,000. This means the first \u00a3175,000-worth of your primary residence is outside of IHT calculations.\u00a0These allowances can be combined for your home if the value exceeds the total amount of \u00a3500,000 for individuals or \u00a31 million for couples. But consideration still needs to be made for other assets too.<\/p>\n If you are married, then these two allowances are combined with your partner. This means up to \u00a31 million of your joint estate is potentially not liable for IHT.\u00a0This is because there is no liability on the death of the first married partner. The combined allowances are used to calculate liability once both have passed away.\u00a0Beyond these basic allowances are a series of gifting rules such as annual gifts and the so-called \u2018seven-year rule\u2019 \u2013 which exempts gifts of any value from IHT, but only if you live for seven years after the gift was made.<\/p>\n It is essential to take advantage of these rules to minimise liabilities. But also critical is making a plan for how to do so in the most efficient manner possible.<\/p>\n At the end of the day it is not just the tax liability your estate has; it is making sure your retirement plans are not compromised by changes you make to try and minimise the tax bill. A financial planner can help ensure the best outcome possible on both issues.<\/p>\n","protected":false},"excerpt":{"rendered":" Ever more families are facing inheritance tax (IHT) bills as frozen thresholds push more estates into liability. HMRC took \u00a31.5 billion in IHT receipts in the first two months of the current tax year, according to its latest data.\u00a0This is an uptick of just under \u00a3100 million on the comparative period last year (a rise of 7%) and marks another consecutive increase for the Government from the duty, which…<\/p>\n