Inheritance tax (IHT), once thought of as a tax on the truly affluent, now affects more families than ever before.
Leaving loved ones to incur up to a 40% reduction due to tax on their inheritance is a hard ask. Yet despite many children and grandchildren being ill-equipped to grapple with IHT, more and more families are having to deal with it.
It’s a situation that is set to continue, with the Office of Budget Responsibility forecasting that IHT revenues will reach £8.4 billion by 2026/2027.
In better news for your family, the residence nil-rate band threshold is set at £175,000 for those who qualify when passing their main residence to direct lineal dependents. This goes some way to reflect surges in property prices, as well as other asset values recovering, which together have dragged more households into the IHT net.
What exactly could your family be liable for? We’ve already discussed the residence nil-rate band threshold of £175,000. Then you can factor in that the first £325,000 of your estate is likely to be exempt from IHT. This means that, subject to various conditions, if you’re married or in a civil partnership, you could have a tax-free estate worth £1,000,000. Yet, the simple fact is that IHT could be considered a voluntary tax. The Treasury relies on our inertia and reluctance to confront the issues of death and inheritance. To make things worse, the Treasury’s coffers are boosted at the exact time your loved ones least need the added hassle.
Help your family now: There are many perfectly legitimate ways to mitigate IHT through foresight and careful financial planning. You don’t need high-powered tax planning, just a willingness to discuss the issue as a family, act and make use of the many options available.
To receive a complimentary guide covering wealth management, retirement planning or inheritance tax planning, contact Peter Harding Wealth Management on 01202 830730 or email peterhardingwm@sjpp.co.uk.
Peter Harding Wealth Management is a trading name of Peter Harding Practice Ltd.