An ever-increasing number of British families are finding themselves liable to pay Inheritance Tax (IHT), recent research reveals.
According to up-to-date figures from HM Revenue & Customs (HMRC), the Treasury collected a record £5.3 billion in IHT last year – up 13 per cent on the amount of IHT brought in the previous year.
This is largely due to the fact that, despite ever-increasing wealth and property prices, the UK’s IHT threshold or ‘nil rate band’ has remained frozen at £325,000 for several years.
Any estates valued at more than this amount will incur IHT at a hefty rate of 40 per cent of their total value – which is why IHT planning is becoming more and more important.
How can I save money on IHT?
There are a number of ways families and individuals can mitigate their IHT liability, but it pays to seek specialist advice, as circumstances will always differ from person to person.
One option worth exploring might be the additional residence nil rate band (RNRB). First introduced in April 2017, this is an additional tax-free threshold families can tap into if they plan on leaving a residential property to their direct lineal descendants in their Wills.
As of 6 April 2018, individuals can pass on an additional £125,000 in property value to children, grandchildren, step children and foster children completely tax-free if they seek appropriate RNRB advice.
Due to the fact that married couples or those in a civil partnership can combine their allowances, couples benefit from the new rules even more, as they can effectively pass on £900,000 worth of property IHT-free.
However, there are plenty of other options available. For example, individuals can reduce the rate at which they will incur IHT on the total value of their estate by passing a portion of it to a charity when they die. By leaving 10 per cent of their estate to a charity, for example, individuals will pay IHT at a rate of just 36 per cent as opposed to 40 per cent.
How can Moore Thompson help?
Our expert team at Moore Thompson can assist with all aspects of IHT planning, offering specialist advice tailored to suit your unique circumstances.
Check out our helpful animation below:
To find out more, please get in touch today.