The government has recently announced that inheritance tax (IHT) receipts for the period April 2022 to February 2023 are £6.4 billion, which is £0.9 billion (or 14%) higher than in the same period a year earlier.
Are we really 14% wealthier than we were a year ago?
If we are to believe the Office of Budget Responsibility (OBR) figures, this level of increase is just the tip of the iceberg, over the next five years it is estimated that the number of deaths triggering an IHT charge will increase by over 60% compared with the 2020-2021 figures.
The continued freezing of nil rate bands and other allowances is a key contributor to this rise in IHT payments.
In 1986 the former Labour chancellor, Roy Jenkins, described IHT as “a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue”.
One message behind the statement was that taxpayers then had the opportunity to minimise their IHT exposure if they chose to do so.
They still do. In 2023 there remains a multiplicity of mitigation methods that can be deployed.
A lifetime strategic plan is often the starting point in identifying sums of money which could be gifted or settled into trust tax efficiently without jeopardising the financial security of the donor/settlor.
The range of options reduces with age so we would always encourage clients to consider IHT in the context of their wider financial affairs and start planning as early as possible.
The cumulative effect of the regular use of all available allowances and reliefs each year, combined with tax-efficient Wills, can make a significant impact before more focused planning is introduced.
If you want to investigate the IHT allowances and reliefs available, or if you want to confirm you have structured your Will in a tax-efficient manner, please contact one of our qualified Advisers via our website: email@example.com
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