Receipts from inheritance tax (IHT) are on the increase again. In 2011/12, the Treasury took £2.91 billion compared with £2.72 billion in 2010/11. The number of estates that paid IHT also increased by 3,000 to 20,000.
The current rules mean that a deceased’s estate will be liable at 40% on all chargeable assets that exceed the nil rate band -currently £325,000. Chargeable gifts made within the immediately preceding 7 years are taken into account for this purpose.
In 2008/09 and 2009/10, IHT receipts had reduced due, in the main, to two factors: the economic recession, meaning that asset values decreased and the introduction of the transferrable nil rate band, meaning that if the first spouse to die did not use all of their nil rate band the unused amount (expressed in percentage terms) could be transferred to the surviving spouse.
These two factors have now “bedded-in” to the statistics on tax receipts. Furthermore, as the nil rate band has been frozen at £325,000 since 2009, we are now seeing an increase in the tax take. Of course, the nil rate band is due to increase to£329,000 in 2015/16 but this is a fairly insignificant increase in light of the fact it has been frozen, and is unlikely to make much of an impact on these figures.
Given that the payment of IHT will now impact on more families, there should be more enthusiasm to hear about IHT-effective planning and strategies. We can directly advise clients on such strategies and work in conjunction with other professionals to formulate planning strategies. If you think your family will have to pay Inheritance Tax on your estate and would you like to take steps to stop this from happening please make an appointment with our Chartered Financial Planner Peter Davies who specialises in this area.