According to the latest statistics, HM Treasury receipts from Inheritance Tax (IHT) increased by 22 per cent in the 2015/16 financial year over figures recorded in 2014/15. IHT takings soared to a record-breaking £4.7 billion – news which, more than ever, highlights the importance of effective future and IHT planning.
The rise has been attributed predominantly to an increase in house prices in recent years, which means that, potentially, more UK families are now finding themselves faced with the so-called ‘death tax’.
Tim Steele, Partner and Inheritance Tax specialist with Palmers Solicitors, explains that Britons need to be aware of IHT rules and thresholds.
“Inheritance tax is charged at a rate of 40 per cent of the value of any assets over an individual’s available nil rate band,” he says.
“Currently this is set at £325,000 per person, although if the first of a married couple to die leaves everything to the survivor then their nil rate band can be transferred, so that a maximum of £650,000 can be left on second death without paying any tax.
“There is some additional relief on the way with the introduction of an additional ‘residence nil rate band’ of £100,000 per person from April 2017 – which will further increase to £175,000 per person by 2020/21”. However, Mr Steele explains that there is some confusion regarding how this measure will apply – and that expert advice should be always sought to ensure the tax burden is effectively minimised as much as possible.
“The residence nil rate band will only apply to those leaving their home to their ‘direct descendants’ and details are still to be announced on how the rules will apply to those who have downsized or sold their property in order to move into residential care,” he says.
“It is important to find out how the residence nil rate band will affect you, if at all, and how to put in place plans to maximise available reliefs. For example, no inheritance tax is payable on gifts to charity and it may, in certain circumstances, also be possible to claim relief on business or agricultural assets.
“By taking advice now, you will have taken all available steps to ensure that the assets you have worked hard to accrue are passed to your chosen beneficiaries, rather than into the tax man’s coffers,” he added.
Palmers Solicitors specialise in advising on all aspects of Inheritance Tax and Private Client law.
For more information, please contact Tim Steele at our South Woodham Ferrers Private Client team at firstname.lastname@example.org.