Inheritance tax (IHT) is becoming a concern for an increasingly large percentage of the population. In the last year alone, it has been reported that inheritance tax receipts have risen by 7.2% since the previous year. With a new government in place, now is a good time to review the current rules and review your own inheritance tax position. Understanding your inheritance tax position Inheritance tax is paid at 40% on an estate above the available nil rate band threshold of £325,000 (you may also be able to access a further residence nil rate band of £175,000 in specific circumstances). The nil rate band has been set at £325,000 since 2009 and the residence nil rate band since 2020. According to the Office for Budget Responsibility, house prices have increased by more than 70% between 2009 and 2022, so the nil rate band of £325,000 is increasingly not enough to cover all the assets that people own. How can you reduce your inheritance tax bill? Thinking about preparing a will and estate planning can be overwhelming, so here are a few pointers for you to start thinking about the future of your estate: 1. Review your current assets and debts. Perhaps get an up-to-date valuation of your property and investments to know where you stand. In an age of click-bait articles, it is important to fact-check your own individual situation before you make any financial decisions and changes to the ownership of your assets. Check who legally owns the assets you enjoy; for example, perhaps you live with a partner and there is an informal agreement about what should happen to property in the future. You cannot leave these matters to chance, and you may want to consider getting legal advice if you co-own any assets or if you have any informal loans or agreements in place. It is important to educate yourself on what the position would be if something happened to you, so that you can plan accordingly. Do you have any minors or dependents? Consider whether they would be protected if something happened. 2. Check whether any exemptions apply to you. In our previous article “Current Tax Exemptions on Lifetime Gifting”, we discussed the current tax exemptions and some common pitfalls to avoid. Once you’ve established the size of your estate, you can start to calculate what your potential inheritance tax bill may be. You can consider whether you can make use of the spousal or charity exemption. If you are a business owner, there may be scope for you to make use of the Business Property Relief and Agricultural Property Relief. It is sensible to get legal advice about how these reliefs work and how you may be able to make use of them. 3. Review your will. It was reported last year by the National Will Register that less than half of UK adults have a will. Of those, two in five stated that they had not got around to making one yet. With fewer people getting married and an increase in blended families, it has never been more important to ensure your assets go to the people you want to benefit and that your family members are not lumbered with an unexpected tax charge. 4. Look at your estate holistically. It is rarely the case that it is one solution that will reduce someone’s inheritance tax bill. It is by looking at your needs, wishes, tax position, income, capital, family dynamic and dependents in the whole (to name but a few considerations), that allow you to make decisions about inheritance tax planning. Clients often benefit from speaking to a range of professionals from solicitors, accountants and financial advisors to ensure they are covering their own blind spots. Whilst the new Labour Government has not definitively said whether they will change the rules around inheritance tax, we would suggest keeping your will and estate planning under review – a new Government can mean rules can change quickly. How can Morr & Co assist with estate planning? If you’d like to discuss your estate or would like any further information on the content of this article, please do not hesitate to contact our Private Client team, by emailing info@morrlaw.com or calling us on 01737 854 500 and one of our team will be happy to assist. Disclaimer Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position. Authored by Ola Szymaniec Solicitor Message Tags Insights On this page Related Stories Insights Inheritance Tax Allowances – FAQs View more Contact our team today Contact Us
