Facing The Inheritance Tax Challenge: Is Your Family Prepared?

HM Treasury & Customs (HMRC) figures for 2023/24 show IHT records are on track to be broken again, with the Office for Budget Responsibility forecasting the tax will raise £7.2bn for the government by next March.

In fact, Inheritance tax (IHT) receipts have been climbing since 2009. More recently, the 2021/22 financial year saw a record breaking 14% rise. This was the biggest rise since the 2015/16 financial year.

To illustrate this climb, take a look at the graph below:


Why are inheritance tax receipts rising?

The current tax free allowance or Nil Rate Band (NRB) is frozen at £325,000 until the 2027/2028 tax year. The relatively new Residence Nil Rate Band (RNRB) of £175,000 could make a difference but it is also frozen and eligibility could be affected by the value of your estate or the terms of your Will.  In certain circumstances it may not be available. While IHT is historically associated with the wealthiest in society, this is no longer accurate. Years of frozen thresholds plus house prices skyrocketing in recent years, and soaring inflation means more people are paying inheritance tax. In fact, over 30% more people are being caught out with IHT.

Some refer to this as a ‘stealth’ tax because more people will fall into it without realising it due to the threshold freeze over the years.

It’s time to make IHT planning a priority

A recent study revealed more than half of UK adults with investments did not know how much money they could leave their family before being hit with an inheritance tax bill despite 79% saying they plan to pass their wealth on to loved ones when they die. Figures show around one in every 25 estates pay the tax.

Under current rules, If the entire value of all your assets exceeds the NRB, which is £325,000 for the 2023/24 tax year, and you have no entitlement to the all or part of the £175,000 RNRB, you may be liable for IHT.

Speak to your adviser about Inheritance Tax

We know it isn’t easy to discuss what will happen to your wealth after you pass. By actively engaging with your wealth now and putting an effective plan into place can reduce your potential tax bill and give you the long-term security and peace of mind to enjoy later life.

Inheritance tax planning can include setting up a trust, making full use of gift allowances, creating a will and leaving a legacy to a chosen charity.

If you have questions about your own assets and whether you will be hit by inheritance tax remove the uncertainty and speak to your adviser today. Alternatively, if you are new to financial planning and would like a review or your current circumstances contact our team using the form below to arrange a free consultation.

Facing The Inheritance Tax Challenge: This article is not personal advice. The value of your investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Remember tax charges and their benefits can change and will depend on your individual circumstances.

Source FT Adviser, HM Revenue and Customs

Ready to connect? Start your journey today
  • This field is for validation purposes and should be left unchanged.
Reviews and Ratings for Financial adviser Mark Reidford, Chester
The Financial Ombudsman Service (FOS) is an agency for arbitrating of unresolved complaints
between regulated firms and their clients. Further details of the FOS can be found on its website:
© 2024 Innes Reid