Recent HMRC figures from the first half of the 2021/22 financial period show that there has been an increase in inheritance tax (IHT) of a whopping £0.6 billion, compared to the same period a year prior.
Between April and October of this year, £3.6 billion in IHT was collected, which works out as a 20% increase on the same period a year prior.
So why has there been such a huge increase? It could be a result of more people transferring
wealth during the Covid19 pandemic. It’s also very likely a result of the significant rise in property prices that we have been seeing in recent months. In fact, just this week property prices were reported up 11.8% over the year to September. The average house price is now £270,000, which is up £28,000 in a year. This puts many people over the IHT threshold.
As the IHT thresholds are frozen until 2026, it’s expected that more people will be facing IHT bills in the coming years. There is, however, good news. There are ways that you can prepare for IHT and mitigate the bill.
We always advise speaking to an advisor who will talk you through your various options. There are different tax strategies that should be considered, and options such as making gifts and tax-efficient investments can help to reduce an IHT bill.
Many people were surprised that there were no changes mentioned in the recent budget to IHT. However, before the pandemic hit there were several reports published by the Office of Tax Simplification and an All Party Parliamentary Group which suggested that there may be some reforms yet to come to IHT.
Suggested reforms included amendments to lifetime gifts, the interaction of CGT with other allowances e.g. business and agricultural property relief, and also exemptions. It is likely that there will be reforms to IHT, but at this moment in time it is difficult to estimate when.
That’s why it’s so important to take advice, have an understanding of the law, and be aware of various options available to you to mitigate your IHT bill.
If you would like to arrange an appointment to discuss IHT, get in touch with Kindred Estate