A recent Survey from Time investments has found that over 50% of Britons aged over 55 have no idea what the Inheritance Tax liability will be when they pass away (source: Accountancy Daily).
With estate values rising for more and more families, some could be left with a 40% tax burden should the deceased estate be in excess of the IHT threshold - although with careful strategic planning AHEAD of time, it may be possible to mitigate a substantial amount of this,
In March 21, the Chancellor announced a freeze on tax-free allowances. Both the nil rate band and residence nil rate band
are fixed at £325,000 and £175,000 until April 2026.
Individuals are not currently required to pay IHT if the value of the estate is below the Nil Rate Band of £325,000 and an additional Residence Nil Rate band of £175,000 applies to those with an estate. Everything above this is taxable at 40%.
The freezing of these allowances may push some clients’ estates over the threshold and into paying IHT, particularly considering rising house prices and investment growth.
The five-year freeze on IHT is expected to bring in £985m in extra revenue, meaning more than 36,000 estates a year are expected to pay IHT by 2026.
After the Budget, the government also announced that reporting regulations will be simplified later in 2021 so that from 1 January 2022 more than 90% of non-taxpaying estates will no longer have to complete IHT forms for deaths when probate or confirmation is required.
If you have any questions about Inheritance Tax or estate planning, we would recommend you contact us accordingly.