HMRC collected £2.6bn from inheritance tax (IHT) in the 13 weeks between April and July 2023. This is higher than in the same period a year earlier
June 2023 was the highest monthly total on record and could be due, in part, to the effects of the rise in interest rates and frozen tax allowances. HMRC charges interest on late or part payments of IHT. IHT thresholds before an estate pays the tax are frozen until 2027-28.
This tax is payable on all a person’s assets including property, personal belongings, and investments over £325,000.
Estates will be taxed at 40% on anything above the £325,000 threshold when you die (or 36% if you leave at least 10% of the value after any deductions to a charity in your will).
The Residence Nil Rate Band (RNRB) is an additional inheritance tax allowance available to some. The RNRB is currently set at £175,000 and is available in addition to the general Nil Rate Band (currently £325,000) if certain qualifying conditions are met. The residence nil rate band will gradually reduce or taper away for an estate worth more than £2 million 1.
So, what steps can you take?
The first step is to have up-to-date wills in place. Some people may also benefit from using lifetime gifts and trusts. Pension pots can be often passed outside of an estate (for IHT purposes) so are an important planning tool for some.
A useful way of reducing your inheritance tax liability is through careful estate planning and using tax reliefs and exemptions. These can include home and nil-rate bands, gift-giving, the creation of trusts, or the bequest of assets to tax-exempt recipients, such as charity.
Life insurance policies have traditionally been part of IHT planning but these need to be right type of insurance and existing plans may need to be written in trust.
Seeking advice from your regulated, independent financial adviser should be your first step. One of Temple Wealth’s IFAs will be happy to help with all of your estate planning needs. You can contact our advisers on 01329 282882, or by messaging our Facebook or Contact Us pages.
The content of this article is for your general information and use only and is not intended to address your particular requirements. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts and their value depends on the individual circumstances of the investor.
The Financial Conduct Authority does not regulate Wills, trusts, tax and estate planning.