Inheritance Tax: Safeguarding Your Family’s Financial Future As Receipts Reach New Record

picture 1247354 1920

Inheritance tax (IHT) receipts have hit an all-time high in the previous financial year, suggesting that the tax has become a “mainstream tax on ordinary people.” According to new data from HMRC, the total take for 2022-2023 reached £7.1 billion, surpassing the previous record of £6.1 billion set last year by £1 billion. The tax continues to provide a lucrative source of revenue for the Treasury.

Estimates at the Spring Budget suggest that over the next five years, Inheritance Tax will bring in £38 billion, with annual receipts set to exceed £8 billion by 2027-28, and 6.7% of deaths triggering an IHT charge. The nil rate band remains frozen at £325,000 until at least April 2028, causing more families to be caught by the IHT net due to the inflationary growth of asset values.

In response to these changes, clients are increasingly interested in passing wealth to the next generation in a bid to mitigate the impact of IHT. Gifting is one option, with an annual gift allowance of up to £3,000 per tax year. However, many individuals have concerns about control and protection when passing on wealth, leading them to consider tools such as Family Investment Companies and Trusts.

With the projected total IHT tax taken by 2027-2028 at £45 billion, people must assess the value of their estates regularly, including getting an up-to-date valuation of owned property due to significant house price increases during the pandemic.

To help mitigate IHT, investors could consider certain investments which provide full inheritance tax relief for the life of the investment once they have been held for two years. It is also essential for families to ensure they invest in the most tax-efficient manner possible.

In conclusion, the rising IHT receipts remind families to carefully plan their tax strategies to avoid paying more tax than necessary. Exploring options such as gifting, tax-exempt investments, and using other tax-efficient tools to manage exposure to IHT is essential.

To learn more about inheritance tax planning and explore the best strategies for your unique situation, contact our team of experts at Mercian Accountants. Let us help you protect your wealth for future generations. Get in touch with us today.

About Graham

Accountant specialising in tax, property, and estate planning. A regular speaker at landlord, property Investor, and later life planning events.

12088 Image Size: 1920 x 1324