On 1 June more than 50 Tory MPs, including former Chancellor Nadhim Zahawi, urged Rishi Sunak and Jeremy Hunt to scrap the ‘morally wrong’ inheritance tax.
According to recent government figures, HMRC raised £7.1 billion from inheritance tax between April 2022 and March 2023 – an increase of more than £1 billion from the previous financial year.
Inheritance tax has long been a topic of debate and controversy and public opinion varies greatly, with the discussion surrounding it often involving a delicate balance between generating tax revenue, and the individual’s freedom to pass wealth to future generations.
What is inheritance tax?
Inheritance tax is a tax on an estate of someone who has died – this can include property as well as assets and money.
There’s normally no inheritance tax to pay if the below circumstances apply, although you may still have to report the value of the estate to HMRC:
- the value of your estate is below the threshold (currently £325,000, as at June 2023);
- you leave everything above the threshold to your spouse or civil partner (if you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die); or
- you leave everything above the threshold to a charity.
If you leave your property to any children (including adopted, foster or stepchildren) or grandchildren, your threshold can increase to £500,000.
Inheritance tax rates
The current standard inheritance tax rate is 40%, although it’s important to know that this is only charged on the part of your estate that’s above the threshold.
Inheritance tax can be reduced to 36% on some assets if you leave 10% or more of the ‘net value’ to charity in your will.
You can find out more about the current rates and thresholds on the gov.uk website.
How to reduce inheritance tax
There are a number of legal ways you can help minimise the inheritance tax charged on your estate, from making use of your allowances, to structuring your will in a tax efficient way or leaving money to charity. Read more about personal tax planning here.
Did you know that you can also make certain lifetime gifts, and give money away, without adversely affecting your inheritance tax position too? Our handy guide sets out what lifetime gifts are exempt from inheritance tax, including gifts made between spouses, small gift allowances, and any gifts that are made more than seven years before death
How can a solicitor help with reducing inheritance tax?
While the debate surrounding inheritance tax continues, it is crucial to review your circumstances periodically and seek professional advice.
Our team of dedicated personal tax planning solicitors are experienced with advising individuals on minimising their tax liabilities while ensuring any decisions fulfils all legal obligations. Get in touch to see how we can help you and your family today.
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