Despite no obvious mention of Inheritance Tax in Chancellor Rishi Sunak’s Autumn Budget, inflation and a surge in the housing market are believed to be the reason that many people will be left with this burden after a loved one dies. The number of estates subjected to the death duty will reach close to 50,000 per year by 2026, more than double the number of people paying it prior to the pandemic.
Just six months ago, the Office of Budget Responsibility said 36,000 people would be paying the 40 percent death duty by 2026.
The total amount families will pay in Inheritance Tax is expected to reach £7.6billion by 2026, which is an increase of £1billion from the March projection of £6.6billion.
Express.co.uk spoke exclusively with Christine Ross, Client Director at Handelsbanken Wealth & Asset Management about Inheritance Tax and the best ways to ensure people are prepared for it.
She explained that Inheritance Tax is charged at a rate of 40 percent above £325,000, known as the nil rate band.
READ MORE: Inheritance tax warning: Rishi Sunak’s assault on wealth ‘will hit many with hefty tax bill
This falls immediately outside of the estate for Inheritance Tax purposes. There is also a small gifts allowance of £250.
She said: “You can make as many small gifts of this amount – but to different people – and not to the person who has benefitted from your annual exemption.
“A parent can also make a gift of £5,000 to a child for their wedding.”
Moreover, she mentioned a less commonly used exemption that people use called surplus income.
Ms Ross added: “It is possible to give away as much money as you wish, as long as you survive for seven years from the date of the gift.
“Whenever making gifts it is a good idea to keep records.
“One way would be to write a letter to the recipient with the date and amount of each gift, keeping a copy with you will and other personal papers.”
The Government is expected to benefit to the tune of £2.7billion in additional revenue through Inheritance Tax in the next five years despite Mr Sunak promising to cut taxes by the time the current Parliament ends in 2024.
Mr Sunak froze the income tax bands and raised the rates of National Insurance, dividend tax and corporation tax as a reaction to the economic fallout of the pandemic.
Even though the £325,000 IHT allowance has not risen since 2009, more families appear to be on course to be caught out as their investments and properties rise in value.
For all the latest Business News Click Here
For the latest news and updates, follow us on Google News.
