More and more people are being caught in the inheritance tax net – between April to September 2022 HMRC processed inheritance tax receipts of £3.5billion. That was an increase of 13 percent on the same period a year before and with house prices continuing to rise, even more Britons could be faced with a bill in 2023. With sky high inflation eating into people’s hard earned savings, there’s never been a more important time to make the most of all tax breaks and incentives on offer.
The standard rate of inheritance tax is 40 percent and is paid by the person who inherits money or property when a person dies.
More people end up paying every year because the threshold at which people have to pay inheritance tax has remained the same at £325,000 for a number of years despite the average property price now exceeding this.
This means that even Britons with “moderate wealth” should take action to avoid a hefty bill according to Ian Dyall, Head of Estate Planning at Evelyn Partners.
For those who can afford to gift, Mr Dyall states it is worth making use of the exemptions available, as they could immediately slash IHT liabilities.
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Amy Pethers wealth adviser at RBC Brewin Dolphin said it’s important to discuss tax planning with one’s partner.
She said: “Talking about death and illness probably won’t make your list of best-ever date nights, but it’s really important to consider how your finances would hold up if the worst were to happen.
As a couple, your finances may be closely intertwined, which means if one of you suffered a serious illness or passed away, the other could really struggle financially.
“A financial adviser can help you decide on the right policies and level of cover for your personal circumstances.”
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Not having a will in place can lead to huge problems further down the line, especially for unmarried couples.
She added: “This is also a good time to think about drawing up a will.
“Writing a will ensures your money and other assets go to the right people and causes, and that your wishes are carried out.
“Having a will is especially important if you aren’t married or in a civil partnership – even if you’ve been living together for years, you’ll have no entitlement to your partner’s estate if they die without a will.”
10 ways to pay less inheritance tax to HMRC:
- Consider putting property into trust
- Make sure they know about Business Owner Exemptions
- Donate a part of it (above the threshold) to charity
- Gift up to £3,000 to family members and friends tax free
- Encourage them to spend it well before they die
- Make the most of wedding gift allowances (up to £5k)
- Buy a funeral plan
- Maximise all gifting allowances
- Be mindful of inheritance tax thresholds
- Speak to an independent financial adviser.
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