Inheritance Tax is back on the political agenda.
When the UK economy finally returned to its pre-financial crisis growth level this summer, Chancellor George Osborne was in receipt of other news that perhaps only he welcomed: Inheritance Tax (IHT) bills of £3.4 billion had almost touched levels last seen in 2008.
Households paid more in IHT last year than at any point since the start of the recession. HM Revenue & Customs’ (HMRC) receipts from IHT increased by 8.6% over the last year as 15,976 estates were caught by the tax.
The rise in death duties reflects the recent surge in residential property prices, as well as the strong recovery in other asset values, which has dragged more households into the IHT net. Residential property now makes up around a third of the total value of taxpaying estates, according to HMRC. Moreover, as the average value of estates continues to rise, an increasing number of estates will be valued over the IHT threshold, or ‘nil-rate band’, of £325,000 which the UK government has committed to freeze until 2018.
Figures from the Office for Budget Responsibility (OBR) forecast that the number of families that will be hit by IHT over the next five years is set to double from one in twenty estates to almost one in ten. The OBR also predicts that death duties will add £5.8 billion to the Treasury’s coffers in 2018/19..
Back in 1992, the Conservative manifesto claimed that IHT tended to fall on “people who are not rich enough to engage in high-powered tax planning, or who, for lack of knowledge or advice, fail to take the necessary precautionary action”.
But now, as then, the mitigation of IHT does not require high-powered tax planning; only a willingness to discuss the issue, take action and make use of the many options available. Data from the Office for National Statistics shows that IHT exemptions and reliefs were worth £15 billion in the last tax year – six times the value of IHT that was collected in 2011/12 – which suggests that there are plenty of tax-saving opportunities available.
What is for certain is that Inheritance Tax is again on the agenda of the main political parties – and even more so in the wake of the recently announced changes to the taxation of pension death benefits.
IHT Planning is a key specialty within my Practice; if you would like to review your position on IHT please contact me to arrange a meeting.
NB :The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.
As an Associate Partner Practice of St. James’s Wealth Management, Robert Hutchinson provides a wide range of wealth management services to both individuals and businesses in the East of England and Home Counties.
My emphasis is on maintaining a long term relationship with my clients and to provide them with a source of trusted advice as their needs evolve over the years.
St. James’s Place Wealth Management is a FTSE 100 company, recently awarded ”Best Wealth Manager 2013” Shares Awards 2013.
