Inheritance Tax – here to stay!
Planning to reduce your inheritance tax (IHT) liabilities must start at an early stage and to many people’s surprise, are not only applicable on death but can be payable during your lifetime too. Although there has been much talk about more favourable amendments to the IHT regime, it’s safe to say that it’s here to stay.
Our private client associate, Matt Parr, fills us in…
Latest figures published by NFU Mutual indicate that the average IHT bill has reached almost £200,000 for the most recent tax year – an increase of approximately £60,000 over a period of five years. The total haul for HM Revenue & Customs reached £5.4bn in 18/19 up from £3.8bn in the 14/15 tax year.
IHT liabilities can arise during someone’s lifetime, and not just on their death, particularly if they make certain gifts into certain types of trusts. HM Revenue & Customs have identified a total of 5,000 individuals who have paid IHT while they are still alive as a consequence of making such gifts, as well as other chargeable transactions and disposals.
Despite the introduction of the Residence Nil Rate Band, the IHT receipts for HM Revenue & Customs has increased.
It is widely recognised that the Residence Nil Rate Band legislation itself is complex, prejudicial and unpopular. The intention was to increase the Nil Rate Band to £500,000 (up from £325,000), but this only applies to a select group of people in specific circumstances. It is certainly not the universal relief that the Government would have had you believe.
The Office of Tax Simplification – the fact this exists highlights how complex the UK’s tax regime is – has very recently published its recommendations as to how the IHT regime can be amended and much to the majority of advisors dismay the Residence Nil Rate Band has not been targeted for scrappage or even amendment.
While inheritance tax revenues increase there is little chance of the UK Government looking to scrap it. There has been talk of the system being changed to come more into line with those imposed in a lot of other European countries, such as Ireland’s Capital Acquisition Tax, which offers different tax rates depending on the relationship between the deceased and the beneficiary, however, this looks unlikely.