Soaring property prices are helping the government to reap billions of pounds in inheritance tax, but Top 30 advisory firm, Bishop Fleming, says families can do more to safeguard their assets from falling into the Treasury’s coffers.
The firm, which delivers accounting, tax, corporate restructuring and advisory services to businesses and private wealth advice to individuals, says proper advance planning can result in families keeping more of their wealth when someone dies.
Recent figures from the government for the 2017/18 tax year reveal inheritance tax receipts rose to a record £5.2 billion, an increase of 8 per cent on the previous year. This is despite a new allowance being phased in to protect the family home where it is passed on to a direct descendent.
Figures from the Office of National Statistics show that more and more family wealth is being taxed, with nearly 25,000 estates in the past year being hit with an average inheritance tax bill of nearly £200,000.
House prices have risen by around 24 percent in the past five years, with further rises expected, so more and more homes will be caught in the tax net in future despite the extra allowance for the family home.
According to Bishop Fleming partner and wealth specialist Christine Tuckerman, assets transferred to family members or put into trust well before death can save partners and children a large inheritance tax bill. She said it made good sense for families to take professional advice in good time.
The Bishop Fleming partner stressed the need for individuals to check that their wills are up to date to reflect their current circumstances, so that their wishes are fully met, and to minimise the impact of inheritance tax – leaving more for heirs.
Christine commented: “Where someone dies in the UK, their estate can be subject to inheritance tax at the rate of 40% on amounts over £325,000. A will that is not properly considered could leave those set to inherit with a sizeable tax bill.”
She added: “Making a will or reviewing an existing will ensures wishes are properly reflected in writing. A will avoids the intestacy rules which could create undesired results. It also allows for some considered tax planning to minimise a family’s future tax exposure.”
Bishop Fleming’s probate team helps relatives sort through the burdens of dealing with an estate, including dealing with the tax issues.
Christine commented: “Proper planning and clarity over what is meant to happen to an estate is not only a tax-saving measure, but also an act of kindness towards loved ones who will be saved the confusion and upset likely to be the case where a will is out of date or not properly thought through, or even worse, does not even exist.”