HM Revenue & Customs (HMRC) figures show that a record breaking £5.4bn was paid in Inheritance Tax (IHT) in 2018/19.
This is an increase of 3.1% on the previous year, despite the new relief which can allow some of the value of a home to pass to direct descendants without IHT.
Although the new Residence Nil Rate Band (RNRB) can be set against a home if left to a child, this only applies where the estate is valued below £2.3M.
The Nil Rate Band (NRB) has been frozen at £325,000 since 2009 and, currently, will remain at this level until at least April 2021. With property and investment values rising, this is resulting in increased IHT payments on estates.
On top of that, we understand that HMRC is now looking more closely at IHT returns and challenging claims made for reliefs.
It is likely that in many estates at least one-third of the value will go to the government instead of the beneficiaries named in a Will.
The Labour Government have also proposed a radical change to the lifetime giving rules, proposing a lifetime gift allowance of just £125,000.
All of this makes it more important to consider lifetime IHT planning, and the various ways of saving IHT on an estate, well in advance whilst more options are available for planning to reduce the value in an estate.
It is important for the planning to be carried out correctly to ensure that it is successful in saving IHT on death and also that, ultimately, IHT returns are correctly completed and all reliefs claimed.
Bishop Fleming can advise on IHT planning specific to each individual’s circumstances and is also registered to deal with Probate matters.