The latest IHT tax data has just been published, which shows receipts from April to August 2023 were £3.2bn, which is £0.3bn higher than in the same period a year earlier.
Julia Peake, tax and estate planning specialist at Canada Life, commented:
“The Tory government have recently talked about a ‘manifesto pledge’ to abolish inheritance tax altogether, if this is the case, it will leave a large £7bn gaping hole in taxes to fill. The question is, what would they be likely to replace this with should they remain in power post the expected General Election which is due anytime next year. Regardless of abolition or reformation (or nothing at all), all signs point to record-breaking year in IHT receipts for HM Treasury.
“For example, the Treasury has collected £133mn per week in inheritance this tax year so far, up by 10% compared to the same period last year. Despite the slowdown in the housing market over recent months, many people will be caught by the IHT trap. Both the standard and residence nil rate bands are frozen until April of 2028. That’s if you get it – not everyone will be able to claim residence nil rate band due to their personal circumstances. While both the standard and residence nil rate bands (or a percentage of them) could be transferred, it is only applicable for spouses and registered civil partners, not co-habitants.
“Don’t be caught out by thinking that this won’t affect you. It’s not just the value of your home that you need to consider, it’s your whole “net estate” after liabilities have been considered and reliefs have been applied, which adds up over a lifetime. Remember, if you miss the six month deadline to pay IHT, HMRC will start charging interest on top as well.
“The estate planning journey should begin as soon as you start to accumulate wealth and proper consideration should be given as to how you invest this, and how best to pass this on. Using trusts and getting growth on this money outside your estate from day one can help you with this while maintaining control and access, depending on the type of trust you choose. Using multiple trusts at different financial life stages can really help along your financial planning journey as well.
“Making a will and ensuring this is kept up to date with any changing circumstances is key. Remember upon a marriage, any previous wills, will become null and void and new wills will need to be done. Utilising exemptions and making exempt gifts will also help reduce your estate and a professional adviser can help you understand the ways you might be able to manage any inheritance tax liability.”